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4 Common Estate Planning Pitfalls We See As Advisors Thumbnail

4 Common Estate Planning Pitfalls We See As Advisors

Personal Finance

4 Common Estate Planning Mistakes to Avoid

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Estate planning is essential to ensuring your assets are distributed according to your wishes and your loved ones are protected. However, even the best intentions can go off track due to common mistakes. Here are four common estate planning mistakes to keep in mind when reviewing or preparing your estate plan.

1. Neglecting to Regularly Review Your Estate Plan

  • Many people set up their estate plans with the right intentions but forget to regularly review their documents for accuracy. 
  • Life changes and so should your estate plan. 
  • Keep in mind that events such as marriage, divorce, births, and deaths all impact your estate plan. 
  • Outdated plans can lead to unintended distributions and family tension. 
  • Remember to review your estate plan every other year or after any major life event. 

2. Incorrect Asset Titling 

  • Titling your financial assets is crucially important to set the foundation of a strong estate plan. 
  • Keep in mind that beneficiary designations override your will, which could unintentionally bypass your intended plan. 
  • Make sure to review your beneficiary designations alongside your estate documents to ensure that everything is aligned.

3. Naming a Trust as a Beneficiary Without Proper Planning

  • Trusts can be a powerful tool in estate planning, but they require careful planning. 
  • A common mistake is naming trust as the beneficiary of an IRA without understanding the potential implications to your heirs such as:
    • Higher tax rates
    • Loss of tax-deferred growth
  • It is important to work with professionals who understand these nuances.

4. Conflicting Legal Documents

  • Your will, trust, and beneficiary designations should work together in harmony, not against each other. 
  • Confusion can lead to legal disputes and delays.
  • A well-coordinated estate plan ensures all documents align to reflect your true intentions.

Are You Making These Mistakes?

Check out our video below, where we explore these common mistakes in more detail and discuss key considerations for structuring an effective estate plan.