This is an article from Morris Hall PLLC (https://morristrust.com/) in Phoenix, Arizona, that we thought others may find helpful.
Most wealthy families do not achieve financial stability from an inheritance or by winning the lottery, but from years of hard work and sacrifice. However, it always amazes me that although everyone understands that we are all going to die, a vast majority disregard estate planning completely.
Here are five common estate planning mistakes that can ruin the legacy that you have worked so hard to build.
- No Will. Approximately 70% of Americans do not plan at all, which means they will die ‘intestate’. Depending on which state you live in, dying without a Will could unfortunately cause your estate to be given to people that you wouldn’t have chosen.
- Failing to update your estate plan. Too often, people that have an estate plan allow their plan to collect dust on a shelf. The plan is forgotten. Life changes such as divorce, deaths and births can have a significant impact on one’s original choices. For example, when you create a Will and leave everything to your spouse, you don’t anticipate a future divorce where your hard earned funds could end up going to the ex-spouse’s new family. Depending on the laws of the state in which you reside, this could be a very real possibility. An estate plan should be reviewed every 2 years to ensure that your choices are up to date with your life’s changes.
- Unrealistic view regarding beneficiaries. Everyone should ask themselves if the beneficiaries they have chosen will be emotionally and financially mature enough to handle a lot of cash. Are they a spendthrift? Do they have a drug problem or gambling issues? If there is any doubt now, your estate plan can take these issues into account and protect your beneficiaries from themselves.
- Inadequate estate plan. Some families begin estate planning with a simple Will; however, as years go on and assets are accumulated, the Will may not be the strongest tool. A properly drafted Revocable Living Trust will allow for the avoidance of a living and death probate, restrictions on spendthrift beneficiaries, asset protection, and a minimization of tax issues.
- Failure to change Personal Representative and/or Trustee. The fact is that people change. Sometimes those we name in fiduciary roles may no longer be the best choice. Our relationships with these folks may change over time or they may move out of state. Reviewing your plan every 2 years is essential to ensure that your choices are the best they can be.