For many people, estate planning isn’t an easy topic, and arranging for the distribution of assets after death can sometimes feel like a difficult task. However, one major goal of estate planning is to ensure that your family receives those assets in the way you desire. Because your health, personal wealth, and estate laws often change over time, you need a plan that keeps up with those changes, so your wishes can be honored. You don’t want to leave your family and beneficiaries with financial problems while they’re dealing with your death.
Protect Your Beneficiaries: Key Mistakes to Avoid in New York
Estate plans are not just for those with a lot of money. Most people have property, valuables, and sentimental belongings they want their loved ones to have or to pass on to a favorite charity. But to ensure that everyone receives the assets without issues, it’s important to understand some common mistakes people make when creating their estate plans—serious errors that could jeopardize that process.
#1: Using a DIY Template
The internet is full of do-it-yourself documents for estate planning. You can create wills and trusts from online templates with just some simple instructions. Because many people don’t want to pay an attorney to help establish their estate plans, these templates seem like a good, less expensive idea.
However, without legal guidance, DIY documents can get you in trouble, and you may make mistakes you don’t intend that change the intent of your will or trust.
Potential DIY Mistakes
- Using incorrect legal language in your documents
- Using the wrong terminology
- Assuming your written words are clear and direct and speak for themselves
- Including or excluding beneficiaries you didn’t intend
- Distributing your assets in a way you didn’t want
To avoid these mistakes, it’s important to use an attorney to help ensure your estate plan documents communicate your exact wishes.
#2: Forgetting to Update Your Will
Throughout life, you often face major changes in your family situation. You may get married or divorced, welcome a baby, move to another state, face the death of a parent or a designated beneficiary, or develop a debilitating condition such as dementia. Additionally, you may see changes in your financial situation as well, such as the loss of a job or the sale of a business. When these situations alter your life, your estate documents need to reflect them.
Estate planning is an ever-evolving task. It’s not enough to create the initial documents and then let them stand until you pass. Whenever your life goals shift, major life events happen, the unexpected upends your plans, or laws change, you need to update your estate documents.
For example, if you have a child, adopt a child, or gain additional children through a second marriage, you may want to change the beneficiary designations on a life insurance plan policy or an IRA. If you decide to live in another state, it’s important to review your estate plan to ensure that it coincides legally with that state’s laws. It's important to review your will, trust, and beneficiary designations every time your situation changes, or at least every five years.
#3: Misunderstanding How You Pass Assets to Beneficiaries When You Die
You create wills and trusts to control real estate and other assets you own, but some assets usually not subject to probate, such as IRAs and life insurance, aren’t controlled by a will or trust. These accounts have a beneficiary named on a designation form. It’s important to understand how these types of accounts get passed on after you die.
For example, if you name your sister as the beneficiary on your life insurance policy, and then later you get married, you may expect that your spouse will be the new beneficiary. However, you have to change the designation form to officially cite your new spouse as the beneficiary. If you don’t, your life insurance will be passed on to your sister when you die.
It’s important to review your beneficiary designations for all accounts, policies, and plans that are not controlled by your other estate planning documents.