Estate planning is something you should do early on in your life, but unfortunately, it often gets put off until it’s too late. However, while many people think estate planning only involves the big things—like leaving your major assets to loved ones or taking care of your kids—it’s important to remember that these aren’t the only considerations to make when finalizing estate plans. In fact, there are some seemingly small mistakes you might be making right now that could cost you significantly down the road.
A few common estate planning mistakes include:
1. Assuming a will is enough.
Many people believe that a will is the only tool available when planning for their estates. While a will is an essential element of most estate plans, it's certainly not the only tool you can or should consider. A will can accomplish important tasks such as naming guardians for minor children and stating where you would like your assets to go when you pass, but it also has some limitations:
Creating a will requires your loved ones to go through a court process called probate when you pass away. Probate is not inherently bad, but it is costly and time-consuming (and it’s also public, so the details of your estate become public record).
A will also does not protect you in case of incapacity or serious illness; you will need additional legal documents to create an estate plan that allows your loved ones to take care of you properly in the event of an emergency.
A will also doesn’t provide your loved ones with any guidance, instructions, or limitations to help them with the responsibility of handling their new inheritance. Other estate planning tools give you greater control in assisting your loved ones with managing their inheritance wisely.
2. Not updating your estate plan as life changes.
Far too often, people prepare a will or trust and put it away, assuming no further action is necessary. Yet, estate planning is not a one-time exercise. To protect your loved ones and your assets, you should regularly review and update all of your estate planning documents (we recommend meeting with an estate attorney every 3 to 5 years to check in on your documents). As life circumstances, laws, and assets change, it’s important to ensure your plan stays up-to-date so it’s able to work for your loved ones and prevent litigation or conflict.
3. Forgetting to update beneficiary designations.
In addition to reviewing and updating your core estate planning documents, including your will, trust, and power of attorney, you don’t want to forget to review beneficiary designations and asset titles. Oftentimes, some of the largest and most valuable assets of your estate do not transfer by will or trust, such as 401(k)s, IRAs, and life insurance policies. These assets have beneficiary designations, which allow you to name the person (or persons) you'd like to inherit the asset upon your death. Failing to update beneficiary designations to match your estate planning goals is an all-too common issue that can result in disaster. Forgetting to update your 401(k) after a new marriage could result in a former spouse collecting your retirement savings in error.
A will or trust alone cannot transfer these types of assets and the named beneficiary in your estate plan does not matter. The person you want to inherit the asset must be named in the beneficiary designation, or your heirs will be forced to go to court to claim it.
We Can Help You Build or Update an Estate Plan
Minnesotans face all of these pitfalls, and many others, every day after losing loved ones without proper planning. At Guttman Law, PLLC, attorneys Matt Guttman and Jamie Reff-Wagner, take pride in creating comprehensive estate plans that are adaptable, account for the unexpected, and are kept up-to-date with routine attorney-guided reviews. If you're worried that your will or trust may not protect your loved ones the way you intend, please reach out to our team. We offer free in-person consultations, or Zoom meetings, so you can get your questions answered and learn what estate planning strategies are best for your unique circumstances.
Call Guttman Law, PLLC today at (612) 324-4055 to schedule a complimentary estate planning consultation.