We all need to do estate planning. At some point, every single person is going to need an estate plan to pass on their assets. Many of us will also need plans to set up health care, make medical decisions and much more.
However, people do continue to make the same mistakes with their estate plans, and it can really cause some problems — both for those people and for their loved ones. To help you avoid such errors, here are four of the more common ones that keep happening:
1. Not updating beneficiary designations
Whenever life changes, review your plan. Update it. Make changes so that it’s current. If you get divorced, for instance, or have a new child, you need to have a plan that reflects what should happen with your assets.
This includes changing beneficiary designations on things like retirement plans and life insurance policies. Remember that many beneficiary designations take precedence over your will, so updating your will is not enough.
2. Not making a plan at all
Arguably the biggest mistake people make is just that they fail to plan completely. They put it off. They save it for another day. They forget about it.
The reasons are many: Estate planning makes them feel uncomfortable, it sounds too complicated, or they think they have plenty of time to do it. Regardless of the reasons, it’s crucial to get that plan set up in advance. It’s not worth the risk to wait.
3. Signing something they don’t understand
Take your time with estate planning. Go over all of the little details. Ask questions if there’s anything you do not fully understand.
All too often, people rush to get a plan in place and just sign off on it without really considering the ramifications. They don’t know what the plan means for their family or they think they do but they overlook key details. It’s a serious problem. Never sign until you know everything is perfect.
4. Not using a power of attorney
You can’t predict the future. A power of attorney allows you to plan for it anyway. It gives someone else the power to make legal or medical decisions for you.
You don’t need it now. You may never need it. But it’s still a massive risk to neglect setting it up. Without a power of attorney, how can you be sure your wishes will be respected when you can’t communicate them yourself?
Taking those steps
The key to estate planning is to really understand all of the steps you can take and the options you have. The more you know, the easier it is to avoid some serious mistakes and get a solid plan in place.