Top 3 Mistakes To Avoid In Your Estate Planning

So, you decided to do estate planning. Congratulations! You are doing the right thing to protect your loved ones if something happens to you. However, that’s just the first step. It’s critical that your documents be set up correctly in order to avoid future problems. With that in mind, let’s take a look The Top 3 Mistakes To Avoid In Your Estate Planning.

Naming a trustee or executor is one of the most decisions you’ll face in your estate planning. There are several different types of trustees and executors from which to choose, be it a bank/trust company, a CPA or a family member. But have you thought about naming a successor trustee or executor? If the person or entity you selected cannot serve and no successor is designated, then a court could end up appointing a trustee or executor for you. This may or may not be someone with whom you’d be comfortable. For that reason, be sure to name at least one alternate in your will or trust. In addition, your durable power of attorney should name an alternate agent and your advance directive for health care should name an alternate health care proxy.

The second mistake to avoid in your estate planning is designating a minor or your estate as beneficiary of retirement accounts and life insurance policies. If a minor is a beneficiary of a 401(k), IRA or life insurance policy, then guardianship proceedings in court will be necessary. Guardianship can be both expensive and time-consuming. On the other hand, if your estate is beneficiary, then probate is required — even if you have a trust. This could subject the account or policy proceeds to the claims of creditors and disgruntled family members.

Finally, you want to avoid what’s known as an unfunded trust. A little-known fact about trusts is that simply drafting the trust document itself does not put your assets in the trust. Rather, you must re-title your assets in the name of the trust by executing deeds for houses and other real property and signing new signature cards for bank accounts as well as a written assignment for items of personal property such as jewelry, antiques and furniture. If this is not done, then your goals of probate avoidance, maintenance of privacy and tax avoidance/minimization might be defeated, rendering your trust worth little more than the paper it’s on.

The foregoing is not a comprehensive list, but if you avoid these mistakes, you are well on your way to a solid estate and peace of mind knowing that your loved ones are protected.

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