In Part 1 of this series, we looked at common estate planning mistakes that can leave your loved ones vulnerable in areas like healthcare decisions, probate, and digital assets. But some of the costliest mistakes involve finances, records, and keeping your plan up to date.
In Part 2, here are six more missteps to avoid:
7. Wasted individual retirement account (IRA) funds.
Retirement account beneficiaries generally have the option to receive funds in a lump sum, which could result in a massive income tax bill for them. If this is not your intent, it is crucial to properly plan these accounts to minimize potential tax consequences. A standalone retirement trust, sometimes called an IRA trust, can help safeguard retirement funds from premature or imprudent withdrawals as well as from beneficiaries’ creditors and financial predators while still ensuring that those assets are available to support your beneficiaries.
8. Chaotic record-keeping.
Proper planning ensures that your loved ones do not spend months or years trying to piece together your finances or interpret your wishes. A comprehensive estate plan helps you organize your finances and create a clear system for keeping your important documents, financial information, and instructions about your wishes in one place, readily accessible to your loved ones when they need them most.
9. Failure to consider a surviving spouse’s remarriage, creditors, and predators.
If your surviving spouse remarries, your estate could end up in the hands of people you never intended. Likewise, if your surviving spouse is victimized by financial predators, something increasingly common with an aging population, your family may discover too late that your legacy is gone. A trust can help protect your money after you are gone.
10. Family feuds over sentimental items. Sometimes fights are not just about money.
Feuds and infighting among your loved ones can occur over items that have little monetary value but high sentimental value. You can help avoid such conflict with a personal property memorandum that lists who gets special items such as artwork, family heirlooms, and jewelry. In addition to the financial accounts, your plan should include careful consideration of important family items.
11. Health Insurance Portability and Accountability Act (HIPAA) privacy lockout.
If incapacity leaves you unable to communicate, family members—even your spouse—may be unable to access your medical records or talk to your doctors because of HIPAA privacy rules. Signing a HIPAA authorization form ensures that the people you choose can access your medical information.
12. Outdated estate plan.
Does your estate plan reflect your current circumstances, goals, and needs? Have you, your beneficiaries, or your trusted decision-makers had any major life changes (such as getting married, having a child, passing away, divorcing, receiving an inheritance, or moving to a different state)? A comprehensive review by an estate planner ensures that your estate plan reflects current laws and tax rules and carries out your wishes based on your and your loved ones’ lives today.
These oversights can drain your hard-earned wealth, spark family conflict, and erase the peace of mind you intended to leave behind.
The bottom line: An outdated or incomplete estate plan can be just as dangerous as having no plan at all. Don’t leave your family vulnerable, contact us for a comprehensive review to make sure your wishes are carried out today and in the years ahead.