Hello everyone and welcome to this month’s Ask the CFP segment. This month’s question is, “What are the most common estate planning mistakes?” Over my career I’ve witnessed many estate planning mistakes and most of them come down to simple human error. Mistakes simple happen. However, this may help you double-check your estate plan so they hopefully don’t happen to you.
First, the most common estate planning mistake I see as a financial planner is when tools like a trust aren’t being used properly. For example, if you have a revocable living trust, but it hasn’t been incorporated into your assets or your estate, it may not even be used if you were to become disabled or pass away. I’ve met numerous people that have trusts, but their house isn’t owned by the trust, their investments aren’t owned by the trust and their bank accounts aren’t owned by the trust. In some situations, it may be better for the trust to be the beneficiary of certain assets instead of the owner, but the idea here is that the trust really isn’t being used properly. Attorneys typically aren’t involved in this process, so it’s a common mistake. If your attorney gave you something called a “funding memo,” read it and follow the instructions on funding your trust.
Second, I often see minor children as beneficiaries of investments or life insurance without consideration for guardianship or what happens if the minor actually inherits money at age 14. You can generally name anyone the beneficiary of your assets, but their ability to actually become the new owner of real estate, bank accounts or IRAs is a different story. Speak with a professional about how this works if you have a minor listed as a beneficiary.
Lastly, creating a will, a trust or other estate planning documents is rarely described as fun. It’s no wonder people tend to put off estate planning in general. For those that do draft documents, it’s common to see that such documents aren’t kept up to date. Maybe someone passed away that’s mentioned in a will or grandchildren are now in the picture and weren’t before. It’s important to maintain these documents, just as you would maintain the engine in your car.
Whether you have a complex estate plan or something more straightforward, don’t let these common mistakes take you off track. Estate planning may not be fun, but it feels good when proper planning is in place. If you have a question about this topic or have a question for next month’s video, please send it to dtroyer@MonetaGroup.com. Thanks for watching and we’ll see you next month.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Please speak with a qualified tax or legal professional before making any changes to your personal situation.
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