Creating an estate plan can take quite a bit of time and effort. All of that time and effort can be for not, though, if any mistakes are made that can cause significant problems when it comes time to put the plan in action. What are some of the most common mistakes people make when going through the estate planning process or after the fact?
According to a recently published article, there are most commonly seen when it comes to estate planning. They may seem like minor things, but they can have major consequences for Colorado residents and their loved ones.
Mistake number one: Thinking a will covers all assets
A will is a good thing to have. However, too many people believe that a will covers all assets, and that isn’t true. The provisions outlined in a will fail to cover property that does not have to pass through probate. For example, if a life insurance policy lists a specific beneficiary, that beneficiary will receive the funds upon your death. The terms in your will won’t matter in this case.
Mistake number two: Changing beneficiaries
Let’s be clear — you can change beneficiaries whenever you want. The problem comes with how you do it. For example, if you switch a beneficiary designation from your trust to a specific person or vice versa, it could have adverse tax consequences or result in the wrong person receiving an inheritance — among other issues.
Mistake number three: Failing to fund a trust or lacking assets to do so
Having a trust in your estate planning arsenal can be a great thing if you can fund it. If you forget to place assets in the trust or lack the property to do so, it may be worthless.
Mistake number four: Adding a joint owner
If your estate plan has all your assets going to the estate for distribution upon your death, then you decide to add a joint owner to any of the property — such as a bank account — that can mess up your plan. The money in the account will then go to the joint owner and not be a part of the estate. It is okay to do, just be careful.
Mistake number five: Listing a gift in a will, but paying it while still alive
If you list specific monetary gifts in your will, but then you pay those gifts before you die and never change your will, it could result in payment of the gifts twice. You won’t be around to set things straight. So, if you opt to pay the gift while you are still alive and do not wish for someone to receive it again upon your death, make sure to update your will.