Avoid The Most Common Estate Planning Mistake: Do It!

Avoid The Most Common Estate Planning Mistake: Do It!

Written by: Vanessa McElWrath, CFP®

When it comes to estate planning, the most common mistake people make is the simplest one- most people just never get around to it. It gets put on the backburner and before you know it, months have turned into years and years have turned into decades. But regardless of your age or wealth, spelling out what happens when you pass away ensures your money goes to the people or causes you care about most.

Who needs to do estate planning?

Regardless of income or net worth, most people need to do some estate planning, especially if you are married, have children, or have a positive net worth. That said, the vast majority of people have pushed it off because it’s an intimidating topic- they don’t want to think about death. Estate planning forces you to consider difficult situations and have uncomfortable conversations with spouses and children about death and money- two taboo topics.

What are the basic estate planning needs that everyone should address?

The cornerstone of estate planning is the will. If you pass away and have a will, your property and assets will be distributed according to your wishes. Otherwise, state law governs who gets your property and assets.  A will also enables you to name the person or executor who will manage and settle your estate and enables you to name a legal guardian for minor children. If you don’t appoint a guardian, the state will appoint one for you. Again, this may not always be according to your wishes.

Do you suggest other documents as well?

Two other essential documents are a durable power of attorney for healthcare needs and durable power of attorney for financial matters. With these documents, you name someone you trust to make medical decisions on your behalf should you become incapacitated. After all, you likely do not want the state making “do or do not resuscitate” decisions for you. You can also designate a person you trust to make financial decisions on your behalf in the event of incapacity.

Estate planning can get much more complicated than this- especially if you have the pleasant problem of having assets that exceed the estate tax exemptions. Then, much more intricate planning may be needed. But for the vast majority people, these key documents will make the wealth transfer process as smooth as possible.

How to get these documents in place?

I highly recommend finding an attorney- particularly an estate planning attorney- to draft these documents. With your estate at risk, taking a shortcut and making a mistake isn’t worth it. And it’s fairly easy to find one who will charge you a reasonable fee to draw up these basic documents to your specification.  And if you are working with a financial planner or financial advisor, they can likely make a recommendation for a qualified local estate lawyer.

All too often, it’s easy to avoid estate planning. But the fact of the matter is that it is actually selfish to keep putting it off. It will make things easier- both emotionally and logistically- for your loved ones by having a plan in place.

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