5 Ways Seemingly Good Estate Plans Go Bad

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Estate plan planning worksheet

If you have already crafted your estate plan, then you are – surprisingly – in the minority. Many families don’t bother to think about estate planning until they reach their golden years. Unfortunately, this comes back and hurts a lot of families that suffer tragic sudden loss. However, even if you have an estate plan, it doesn’t mean it will save your family problems. In fact, an estate plan with these notable flaws could end up causing even more issues for your family than not having one at all.

Naming a Problematic Executor

When many families name an executor – the person that will handle portioning out the estate in accordance to a will – they first think to their children. This is typically a fine choice, providing those children get along. Nothing can dredge up old rivalries than the death of a parent. If siblings have a history of fighting, it can be better to assign a more objective executor. The executor need not be part of an immediate family. It can be from the extended pool or even a trusted friend.

Before you assign an executor, it is recommended that you put a lot of consideration into the family dynamic or risk years of messy legal battles ripping apart your family when you are gone.

“Split Everything Equally”

The old “splitting everything equally” among your heirs is the easy out way of estate planning. It leaves everything up to your heirs; they need to do the hard work of deciding “equal” when they want something for financial reasons over another heir’s sentimental reasons.

When it comes to equal splitting, it is best to leave that to any money that needs split up. When it comes to the items in the estate, particularly precious items, antiques, sentimental items, etc., it is better to assign who will inherit them as specifically as possible.

Not Updating an Estate Plan After a Life Event

This is the biggest way a good estate plan can go awry. Estate planning isn’t just a one and done sort of affair, it requires updates. It should be looked over on a regular basis, but any life event merits updating. For example, if your spouse has passed away, you need to go in and specifically name new beneficiaries. If new heirs are not named, your estate won’t “go to the state” as the old misconception goes, but rather your heirs will have to go through expensive probate to inherit.

New children, death, divorce – these are all good reasons to go back and check your estate plan.

Gifting Money to Minors

We all want to make sure our minor children or grandchildren have the best possible start in life. However, while gifting minors money in an estate plan is a nice idea, it may not be a smart one if you don’t put rules in place.

Consider if you had inherited a large lump sum of cash before turning 18? It is unlikely you would have spent it smartly, most likely because very few can resist that allure. It is a better idea to leave them any funds from your inheritance in a trust where a trustee can make sure that the money is used responsibly to fuel their life rather than in a wasteful manner. Furthermore, a trust is an added layer of protection to make sure the minor actually gets the money and it is not used by their guardian.

Not Funding a Trust

If you choose a trust as part of your estate plan, that is a smart decision. However, trusts can be complicated. Often people mistake the schedules attached to a trust as the assets in the trust. However, that schedule is just the assets you intend to put in. You must take physical action to retitle assets like real estate, stocks, or bank accounts to go into the trust or else it will not be transferred.

If you are estate planning and want to avoid these common mistakes and more, contact us today. Estate planning is crucial to easing the strain on your family after you are gone; it is therefore important that you do it right.

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