Do you already have an estate plan? Or perhaps you don’t have an estate plan per se, but over the years you’ve collected all of what you feel are the necessary documents to provide security and protection for your family and your assets after your death? Well, you may want to take a moment to review that existing estate plan of yours. According to this recent article there are five common mistakes made in estate plans, and just one could end up derailing your goals for yourself or for your family.
Some of the common mistakes listed in the article are things that are very easy to fix once you’re aware of them—listing the wrong beneficiary on an old retirement account or life insurance policy, for example. All too often people get a new job or new policy and list the right beneficiary at the time, then that policy goes in a drawer or filing cabinet for years. During those passing years you may get married or divorced, or you may have children. Any of these big life events require changing those beneficiaries. Luckily, making that change is generally a quick and easy fix.
If you aren’t worried about your retirement or life insurance beneficiaries, consider what what will happen to your children in the event of an emergency. Many clients agonize over who to name as guardians of their minor children, but forget to review those decisions every few years. The energetic young couple you chose 7 years ago might now have children of their own, or have moved to another state, and may not be as ideal a choice as they once were. If you listed your parents 10 years ago you might decide in the intervening years that an aging couple is not quite as able as you thought to take on so much added responsibility.
If your trust was prepared years ago when the estate tax laws were different, you may need to update your trust. Many trusts prepared in the 1990’s under old tax law could actually undermine your wishes if not brought into compliance with current tax laws. Specifically, the mandatory “trust-split” on the first death common to older trusts may no longer be necessary. Even worse, they could now result in the surviving spouse having only limited access to a couple’s assets after the first spouse’s death. Also, if one spouse is now receiving Medi-Cal benefits to help with nursing home expenses, an update of your estate plan is usually a “must”.
The fact of the matter is that our lives are not static or stagnant, they are constantly growing and changing, and estate planning documents will need to grow and change with them. If it has been more than 2 years since you last reviewed your plan, it’s time to get out the magnifying glass and give your documents another good look. You might just save yourself and your loved ones some unwanted surprises.