Estate planning is a critical step to securing your financial legacy and ensuring that your assets are distributed according to your wishes. However, even the most well-intentioned plans can go awry if not handled correctly. At Schwartsman Law Group, we’ve seen how a lack of planning or certain oversights can lead to costly legal issues, family disputes, and tax problems. Here’s how to avoid some of the most common estate planning mistakes.
1. Not Having an Estate Plan
The biggest mistake is failing to create an estate plan at all. Many people believe estate planning is only for the wealthy, but it’s essential for anyone who owns assets or has children. Without a will or trust, your estate will go through intestacy laws, meaning the state decides how your assets are divided. This could result in unwanted outcomes, higher taxes, and unnecessary court involvement.
Solution: Ensure you have a basic estate plan that includes a will, powers of attorney, and healthcare directives. Schwartsman Law Group can tailor a plan to your specific needs.
2. Not Updating Your Plan
Life changes, and so should your estate plan. Failing to update your will or trust after significant events like marriage, divorce, the birth of a child, or the acquisition of new assets can create chaos down the road. An outdated estate plan may inadvertently leave out heirs, favor an ex-spouse, or fail to address newly acquired properties.
Solution: Regularly review and update your estate plan to reflect life changes. An estate planning attorney at Schwartsman Law Group can assist you with revisions to ensure your plan is current and legally binding.
3. Overlooking Beneficiary Designations
Your will or trust doesn’t control everything. Assets like life insurance policies, retirement accounts, and payable-on-death accounts pass directly to the beneficiaries you’ve named. If those designations are outdated or incorrect, they may override your will.
Solution: Regularly review beneficiary designations on all accounts. Ensure they align with the rest of your estate plan to avoid unintended beneficiaries receiving large portions of your assets.
4. Failing to Plan for Disability or Incapacity
Estate planning isn’t just about what happens when you die—it’s also about protecting you during your lifetime. Without powers of attorney or a healthcare directive, you risk having a court appoint a guardian or conservator to manage your affairs if you become incapacitated. This could leave critical decisions in the hands of someone you didn’t choose.
Solution: Include durable powers of attorney and healthcare proxies in your estate plan to ensure that trusted individuals make financial and medical decisions if you become incapacitated.
5. Not Addressing Taxes
Estate taxes can take a big chunk out of what you leave behind. The federal estate tax exemption is currently high, but that could change. Additionally, New York State imposes its own estate taxes, and many families could be subject to them. Poor planning could mean your heirs end up paying much more than necessary.
Solution: Work with a tax-savvy estate planning attorney who can help you implement strategies like trusts, charitable donations, or lifetime gifts to reduce your estate’s tax burden. Schwartsman Law Group can help develop tax-efficient estate planning strategies.
6. Not Funding Your Trust
Many people create living trusts to avoid probate and protect their privacy, but one common oversight is failing to properly fund the trust. If you don’t transfer your assets into the trust, those assets won’t avoid probate, and your beneficiaries may face delays and additional legal fees.
Solution: After setting up a trust, work with your attorney to ensure that all relevant assets—like real estate, bank accounts, and investments—are transferred into the trust’s ownership.
7. Leaving Everything Outright to Heirs
While it may seem simpler to leave everything outright to your children or heirs, this can create significant issues if they’re young, irresponsible with money, or going through life challenges like divorce or addiction. An outright inheritance can also be vulnerable to creditors or lawsuits.
Solution: Consider using trusts to distribute assets to heirs in a controlled manner. A well-structured trust can protect beneficiaries from themselves and from external threats like creditors or divorce settlements.
8. Not Planning for Long-Term Care
As people are living longer, many will need long-term care in the future. Failing to plan for the costs of nursing homes or assisted living can drain your estate quickly, leaving little for your heirs. Medicaid planning can help, but it requires careful planning well in advance.
Solution: Work with an attorney to explore long-term care insurance, Medicaid planning, or asset protection trusts. Early planning is key to ensuring you don’t exhaust your assets paying for care.
9. Choosing the Wrong Executor or Trustee
The person you choose to manage your estate or trust plays a crucial role in how smoothly things go after your death. Choosing someone who isn’t up to the task—or who is biased or prone to family conflicts—can lead to disputes, delays, or even litigation.
Solution: Choose a trustworthy, competent person or a professional fiduciary to serve as executor or trustee. Schwartsman Law Group can help you evaluate your options and select the best individual or entity for the job.
10. Not Working with a Qualified Attorney
DIY estate planning can lead to costly mistakes. Online templates and kits may not comply with New York law or address the specific complexities of your estate. Failing to seek professional guidance can leave your estate plan vulnerable to challenges, increased taxes, and unintended consequences.
Solution: Always work with an experienced estate planning attorney. At Schwartsman Law Group, we help clients navigate the complexities of estate planning, ensuring that their assets are protected and their wishes are honored.
Avoiding these common estate planning mistakes can save your heirs time, money, and stress. At Schwartsman Law Group, we have the expertise to guide you through the process and help you create a comprehensive estate plan that meets your needs. Contact us today to ensure your estate plan is properly structured and up to date.
