4 Common Estate Planning Mistakes and How to Avoid Them

iQuanti: Pulling together all the appropriate pieces of a well-thought-out estate plan can be daunting. And even if you've created an estate plan already, you may have missed some critical details. The good news is that most estate planning mistakes can be fixed with just a bit of planning ahead. Here are four of the most common estate planning mistakes and how to avoid them.

1. Not estate planning at all

Thinking about your eventual demise is not something people enjoy doing. So, some people may decide to skip putting together an estate plan entirely. But a major problem with that is loved ones may be left to pick up the pieces when someone passes away unexpectedly with no estate plan in place.

How to avoid it: This major estate planning mistake can be avoided by contacting a financial professional who can help. A financial advisor or estate planning attorney can help you pull together what you'll need to have in your plan, and they can make the process simple.

2. Forgetting to include important details

People forget to put all kinds of details into an estate plan, like final arrangements, healthcare power of attorney documents, and living wills. And sometimes, these missing pieces can cause trouble not just after you pass but during your final days or months as well.

How to avoid it: Create a checklist for all of the items to consider during the estate planning process. Don't forget areas like:

  • Creating a will and living will
  • Putting in place appropriate healthcare directives, including a medical power of attorney
  • Naming beneficiaries for all assets
  • Gathering proof of identity documents
  • Pulling together login, passwords, and access instructions for all accounts
  • Outlining funeral arrangements and final wishes
  • Making a list of charities you don't want to forget in your estate plan

3. Letting beneficiaries become outdated or naming only one beneficiary

Estate planning documents can sometimes go years without an update. And that may mean beneficiaries become outdated, especially if you designate older beneficiaries who may have predeceased you. That's why it's important to keep your beneficiary lists updated and be sure to name more than one.

How to avoid it: It's okay to name only a single primary beneficiary on your accounts. But be sure to have at least one or more secondary beneficiaries. That way, you can be assured that if something happens to your primary beneficiary, there will be someone you trust to take over. 

4. Not having enough liquid assets

Much of what's passed on during estate planning are assets that take a long time to turn into money for heirs. And sometimes, these illiquid assets can make it difficult for loved ones to get the money they need. Considering the addition of a life insurance policy can help to provide asset liquidity.

How to avoid it: Look at your estate as a whole. If many of your assets are illiquid (think real estate, jewelry, art, etc.), look at other more liquid options like a permanent life insurance policy. The cash value component of permanent life insurance makes it a more-easily-accessible option for loved ones while other aspects of your estate are handled.

The bottom line

A great estate plan makes life easier for loved ones after you're gone. So, taking the time and effort to pull it together now will make a big difference for your family and friends after you're gone. First, be sure to create a checklist that includes all the elements you don't want to forget, keep beneficiaries updated, and make sure you have liquid assets. Then, loop in a financial professional if you're hitting a roadblock or are unsure if your estate plan meets your unique financial needs.

Source: iQuanti, Inc.

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Categories: Retirement and Estate Planning

Tags: beneficiary, estate planning, insurance