As baby boomers age, they need to take the time to consider what their life after retirement will look like. While retirement is often a timeframe used to start drafting an estate plan, this is by no means a set time to take such measures. In fact, initiating the estate planning process sooner if often advised because we can never predict what the future might look like or what it might hold. And while individuals in California and elsewhere might think they understand what it takes to complete their estate plan, there are various obstacles to be on the lookout for.
What are the common mistakes made during estate planning? The first and most often mistake individuals make is thinking that they don't really need an estate plan. Some view this process as one used by the wealthy; therefore, if someone doesn't think they have much to pass onto their heirs, they do not think an estate plan will benefit them. This misconception causes roughly half of Americans between the ages of 55 and 64 to not have a will. While an estate plan does protect the assets of those that are wealthy, the documents in an estate plan dictates what will happen when you die or are deemed incapacitated.
The next mistake is not updating a current estate plan. An estate plan is put in place because we cannot predict the future. However, when changes in life alter the purpose of a current will, trust or power of attorney, it is important to update these documents. Failing to do so could result in the wrong heirs and beneficiaries receiving your assets. Additionally, this could result in a wide variety of disputes between or among heirs and beneficiaries.
The third most common mistake made during estate planning are issues with account titling. If financial accounts do not map over to the documents contained in an estate plan, this could cause serious problems. In other words, if a beneficiary for a bank account or retirement account is not the same as those listed in an estate plan, this could result in the negation of the estate document. Thus, it is not only important to make sure these match but are continually addressed when updates are needed.
While it is important to take the time to draft an estate plan, it is equally important to carefully draft the documents contained in an estate plan. Avoiding mistakes in the drafting process will ensure that these documents are properly executed and meet your intended wishes and needs.
Source: Nasdaq.com, "3 Common Estate Planning Mistakes Among Boomers," June 27, 2017