An estate plan is a series of legal documents and tools that should help achieve a number of goals, the most well-known being the transition of our assets. Once we take the time to set up these plans, our estate should be set. Unfortunately, not every estate plan succeeds. In fact, most estate plans will fail. Here is how you can avoid three of the most common mistakes that lead to failed estate plans.
Mistake #1: A failure to follow through.
Taking the time to discuss and come up with the best type of estate plan can be the most difficult part of the process. However, ending here means the plan is likely not complete. In many cases, additional steps are needed to actually activate the plan. For example, those who chose to use a trust to reduce the estate’s tax burden, help guide the distribution of assets and/or reduce the ability of creditors to reach these assets need to take steps to activate the trust. A common mistake: a failure to fund the trust. The assets are not protected until they are transferred into the trust.
Mistake #2: Complacency.
Once the estate plan is set up and funded it is ready to go and you can relax and not give it a second thought, right? Not quite. Although the hard work is likely already done, there are certain life events that trigger a need to review and update the estate plan. A birth or marriage as well as death or divorce within the family are common examples. Changes to the tax code can also trigger a need to change the plan to better ensure it achieves your desired goals.
Mistake #3: Secrecy.
It is also important to communicate your wishes to your loved ones. One of the main reasons an estate plan faces legal challenges is because loved ones believe the plan is not doing what you wanted it to do. If you are clear about how you want your estate to handled, loved ones are more likely to be supportive of the plan.