COSTLY ERRORS TO AVOID WHEN SETTING UP YOUR ESTATE PLAN 

Estate planning is one of the most important financial matters you can address in your lifetime. Unfortunately, many people in Florida often rush it, overlook some aspects, or don’t give it the attention it deserves. 

The risks that arise from a bad estate plan aren’t obvious while you’re living. They only become apparent when your family is least prepared to handle them. 

Avoid these pitfalls when creating an estate plan.

Postponing it until the last minute 

Some people don’t do any estate planning until a crisis or major life change occurs. 

Estate planning is not just for the elderly or rich. It applies to any adult who has assets, dependents, or wishes regarding management of assets and care in the event they are incapacitated or die. 

When things get to the last minute, important decisions are often made when emotions are running high. In addition, there is not an adequate amount of time to consider the implications thoroughly. 

It is advisable to get it started at a time of peace rather than during a crisis. You may consider using professional Estate Planning Services Palm Harbor.

Naming beneficiaries without thinking it through

Suppose a minor child is named directly as a beneficiary without a legal arrangement. In that case, the assets could be subject to a court-controlled distribution until that child reaches age 18.

In another instance, if you do not provide for a contingent beneficiary, the assets may end up going through probate instead of going to the person you named. 

Take the time to look over each beneficiary designation as an integral component of your estate plan and not apart from it. 

Think of the beneficiary designations on your retirement covers, life insurance policies, and certain financial accounts. They pass assets outside of a will entirely. Therefore, a will that doesn’t account for these designations or that conflicts with them creates confusion and potential conflict at exactly the wrong time (when you die).

Not taking taxes into account in the plan

Many of the taxes that can be levied on assets in an estate can have a significant impact on the amount of assets that are actually passed on to the beneficiaries of your will. This includes:

• Estate taxes
• Gift taxes
• Income taxes.

Tax issues should be a component of the estate planning process, not an add-on issue that is tackled once the structure is determined. 

The interaction between different types of accounts, the timing of transfers, and the structure of any legal arrangements established all carry tax implications. You can benefit from the input of knowledgeable professionals who understand the legal and financial dimensions of estate planning.

Not updating the plan after significant life changes

What worked for you 10 years ago may be very different from what is suitable for you now. A well-planned portfolio can become unbalanced and potentially hurtful or lose its effectiveness because of changes in:

• Marriage
• Divorce
• Children
• Grandchildren
• A named beneficiary dying
• Important asset changes
• Tax law changes. 

Estate plans are not plans that you make once and forget about forever. They need to be reviewed and updated over time in order to accurately describe the life you actually live and not the life you lived when you originally prepared the documents. 

A plan that is updated every 3-5 years and after major life changes will remain relevant.

Choosing the wrong people for key roles

Choosing an executor, an administrator, or a guardian for minor children is also a critical consideration that needs to be given the same thoughtful attention as assets themselves. The person you designate in these roles will have to execute your wishes in an environment that can be:

• Difficult from an emotional standpoint
• Complicated from a practical standpoint. 

Some people choose without careful consideration to avoid offending the family. This can jeopardize even a well-thought-out plan. 

The right person for each of these roles is someone who has the:

• Temperament
• Organizational ability 
• Willingness

…to do what’s good for the beneficiaries. Not necessarily someone who is close to you.

Ignoring incapacitation planning

Many people think about wills when they consider what will occur after they die. But they think little about what could happen if they can’t make decisions while still alive. 

A comprehensive estate plan addresses this through roles like:

• A durable power of attorney: It authorizes a person you designate to handle specified financial matters, subject to the document’s terms and applicable law.
• A healthcare directive: It names someone to state your wishes if you can’t speak or decide due to an injury or illness. 

A will should account for such roles. Otherwise, family members might experience uncertainty during a difficult time. Estate Planning Advisors Palm Harbor FL can help you assess the bigger picture when creating your estate plan

The takeaway

Taking a thoughtful approach to estate planning may help you address common planning gaps through:

• Proper planning
• A professional estate planning team
• A desire to make estate planning a continuous process instead of a single “one-and-done” project.