3 Common Estate Planning Mistakes
No matter how young or old they may be, parents always want to protect their children. And yet, many do not undertake the necessary legal steps to adequately protect their children in the event of their untimely death. The following three estate planning mistakes are commonly seen by estate planning attorneys; the good news is that they are easily prevented if you take the correct steps now.
Creating a Joint Account. Naming your adult child as a signatory on an account can help you to manage your finances in the event that you are medically or otherwise incapacitated. However, some people make the mistake of creating a joint account, rather than naming the child as a co-signatory. There is a big difference between these two functions! If the child is ever sued, assets in the joint account could be seized in the judgment. Family conflict can also result if one child is chosen instead of another, and all assets in the account are transferred to the account’s co-owner upon your death.
A better way to manage your accounts is to grant someone power of attorney. And, if assets should be transferred to more than one child, consider establishing a trust with each child named as an equal beneficiary.
Mistakes with Beneficiary Designations. People also tend to make mistakes regarding the beneficiary designations of retirement accounts, life insurance policies, and so on. Many well-meaning parents designate minor children as beneficiaries, assuming they will not pass on before their children reach adulthood. And yet, if that unfortunate event does occur, beneficiaries will be subject to a lengthy court procedure in order to determine a guardian to manage the accounts until the children reach adulthood.
Another common mistake is failing to update beneficiaries any time there is a birth, death, divorce, or other event which warrants a change in the documents. Many people don’t realize that the terms outlined in their will are ineffective if old beneficiary designation forms say something different!
Failing to Complete the Estate Planning Process, or Revisit an Old Plan. Everyone, young or old, should remember that their estate will pass through probate court unless they have taken the necessary estate planning steps to prevent that. This can be a lengthy and difficult process for your survivors, and may can unintended financial hardship as well. Make an appointment with an estate planning attorney to discuss your options, and remember to meet regularly to update your plans if circumstances change.