Estate planning mistakes are costly for loved ones left behind.

We have all heard horror stories about ineffective estate planning.

It has been the subject of fictional films and celebrity news stories alike.

While Prince made the greatest estate planning mistake by dying without even a last will and testament, there are many ways to mess up an estate plan.

Tobacco heiress Dorothy Duke set up her loved ones for a costly estate battle when she named her butler the executor of her $1.3 billion estate.

Her family spent millions of dollars in legal fees before settling the estate.

According to a recent Microsoft Start Money article titled "Seven Estate Planning Mistakes You Can't Afford To Make," celebrities are not the only ones who create estate planning issues for their loved ones.

One cannot simply correct estate planning mistakes when recognized after incapacity or death.

How do people tend to find themselves making estate planning mistakes?

They procrastinate until the "right" time.

When it comes to estate planning, the right time is now.

Delaying until you require the documents is too late.

You must be proactive to protect everyone you love and everything you have.

Failing to do so means your loved ones will be faced with lengthy probate proceedings to determine who inherits based on intestacy laws, or they will be stuck petitioning the courts for the ability to act on your behalf while you are incapacitated.

The stress and costs associated with both are easily avoided through estate planning.

They do not update their estate plans.

Another common estate planning mistake is thinking your estate plan is set forever once created.

Estate planning documents require maintenance and care.

They must change as your circumstances change.

If you have a child and do not update your plan, you could be disinheriting this little one, whether you intended it or not.

Those who remarry but fail to update beneficiary designations or their last will risk leaving everything to their exes.

As your wealth increases or decreases, your estate planning documents may need to change to reflect new liabilities.

They make mistakes by putting their heads in the sand about taxes.

In the past 15 years alone, the federal tax landscape has changed various times.

Those not addressing these changes in their estate planning documents may owe the government a hefty tax bill.

One especially pertinent area to estate taxes is the life estate and gift tax exemption.

The exemption is set to revert from its current $13.61 million to the pre-2017 exemption of around $6.46 million.

What does this mean?

Those with a net worth in excess of this amount will owe estate taxes on the amount greater than this value.

If this describes your situation, it would be a significant mistake not to work with an experienced estate planning attorney to reduce your tax liability.

Because some states have state estate taxes, residents of those states may need to prepare for an even lower threshold.

They make mistakes by ignoring incapacity.

Both incapacity and death are essential subjects of estate planning.

While few people want to dwell on either subject, they cannot afford to ignore them.

To prepare for incapacity, people should have financial and health care power of attorney documents, HIPAA release forms, health care directives, DNR forms, or other documents to outline their wishes for treatment and care.

They forget to plan for non-cash assets.

For many people, cash assets comprise only a small portion of their estates.

They may own a home, antiques, a car, art collections, pets, or other property.

The distribution of these assets must be planned accordingly.

Additionally, it would be a significant mistake not to outline a plan for caring for property or pets in case of incapacity.

They neglect digital assets.

It is nearly impossible to be wholly cut off from the digital world in America.

Many who say they live "off the grid" have not considered all of the information about themselves online, to include in the social media of their family members and friends.

Many people have various digital assets, such as bank accounts, photos, social media, cryptocurrencies, or online businesses.

A common mistake in recent years is to ignore digital estate planning.

You must provide a digital executor with an inventory of your accounts and important account information so this individual can take action on your behalf when you die.

They make mistakes by trying to do it themselves.

Although some tasks can be tackled alone, estate planning is not one of them.

Many people believe they can write a last will and testament themselves and fail to recognize the impact of changing laws and nuanced legislation on their plans.

Even retitling a house can cause significant issues.

Suppose a family retitles the home to joint tenancy with rights of survivorship with an adult child.

In that case, they may find themselves with a lien from a creditor seeking reimbursements for the significant debts the child accumulated.

As a result, this family would ultimately lose the home to creditors.

Yikes!

The best way to avoid common estate planning mistakes is to work with an experienced estate planning attorney.

This post is for informational purposes only and does not provide legal advice. You should contact an attorney for advice concerning any particular issue or problem. Nothing herein creates an attorney-client relationship between Harvest Law KC and the reader.

Reference: Microsoft Start Money (June 23, 2024) "Seven Estate Planning Mistakes You Can't Afford To Make"