Top Estate Planning Mistakes to Avoid

Estate planning in Lakewood, Colorado is a necessity, even for pre-retirees who do not earn six figures, those still paying a mortgage, and those who lack a sizable nest egg.  Furthermore, if your personal finances are still in the red, you can greatly benefit from an estate plan.  However, merely creating a basic estate plan in a hurried manner without an in-depth overarching strategy has the potential to backfire in a big way.  

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Truly comprehensive estate planning requires the assistance of a CERTIFIED FINANCIAL PLANNER™ Professional and a Certified Estate Planner™. These professionals can also collaborate with your attorney to provide estate planning services that lay the foundation for your loved ones’ financial success after your passing.  This holistic, coordinated effort sures up all the potential weak points in estate planning, ensuring the plan proves effective upon your departure from this plane of existence.  Let’s take a quick look at the top estate planning mistakes your financial professionals can help you avoid:

1. Not Having a Plan

If you are like most people, you have put estate planning on the back burner.  After all, thinking about your eventual passing is inherently depressing.  The time to stop procrastinating is now.  

Meet with your financial professionals to lay the foundation for your estate planning.  These professionals will interface with other professionals including your attorney and accountant to guarantee your estate plan keeps control in your hands, even after your passing.  

The alternative is to move forward without an estate plan, assuming your family will agree on how to split up your assets following your death.  Unfortunately, the lack of an estate plan may lead to family issues that overshadow your legacy.  Furthermore, the probate process might lead to an unfortunate outcome that unjustly favors one family member over another.  

Recognize the fact that you are mortal, meet with your CERTIFIED FINANCIAL PLANNER™ Professional and Certified Estate Planner™ to establish an estate plan and you will sleep soundly at night knowing you did everything in your power to establish a roadmap for your family’s financial success.  Your estate plan will be centered on a detailed will.  Your will explains how your property, cash, and other assets are to be distributed to family, friends, and charitable causes after your passing.  

Estate plans commonly include living trusts.  This legal tool transfers all or part of an individual’s estate to a trustee.  The trustee manages the estate on behalf of the individual in question as well as his or her beneficiaries.  

Even if you do not have children, stepchildren, nieces, or nephews, you might have other distant relatives that you would like to receive specific assets upon your death.  If these individuals are not named in your estate planning documents and no family members can be identified, your hard-earned assets may very well go to the state. 

2. Not Making Updates Over Time

Life events necessitate the updating of your estate plan.  Your estate plan must be altered accordingly after the following life events:

  • Getting married
  • Buying a house
  • Making a significant amount of money through investments
  • Getting divorced 
  • Having a child
  • Adopting a child
  • Starting a business 

However, there is no sense trying to alter the estate plan on your own in a DIY (do it yourself) manner.  Rather, the better approach is to notify your financial professionals of your life milestone, inquire as to whether the change should necessitate an alteration to your estate plan and let the professionals take it from there.  

Fail to reach out to your advisor for guidance in the aftermath of a major life event and you run the risk of moving forward with an outdated estate plan.  It is quite possible this outdated plan will lead to the unfair distribution of your hard-earned assets upon your death.  

Once your estate plan is modified, you will rest easy knowing your newly-changed life is reflected appropriately in the corresponding legal documents.  Even simply adding someone as a beneficiary after good financial fortune ensures that the individual receives the assets in question rather than letting the distribution of assets be determined by the probate process. 

The worst-case scenario is failing to update a will after a divorce, allowing the assets in question to be distributed to an undeserving party or even the state.  Your Certified Estate Planner™, CERTIFIED FINANCIAL PLANNER™ Professional, and an attorney will work in tandem to ensure your estate plan is truly comprehensive, ultimately preventing such a nightmare scenario.

3. Failing to Plan for Incapacity Including Long-term Care

Though no one wants to think about it, there is the potential for each and every one of us to become either physically or mentally incapacitated.  If you were to become incapacitated and your estate plan did not identify a durable power of attorney and establish an advance health directive, you would be at the mercy of strangers in the context of medical care decisions.  

Your Certified Estate Planner™ will help you make full use of the legal tools available to ensure the proper decisions are made both in terms of your finances as well as your medical care should you no longer be able to make sound decisions on your own.

4. Not Coordinating Taxes/Estate Planning

Your final gift to your loved ones should not be diminished by exorbitant taxes that could have been avoided with the proper tax and estate planning.  Your Certified Estate Planner™ and CERTIFIED FINANCIAL PLANNER™ Professional can help you establish the proper retirement plans that minimize taxes, establish life insurance, create trusts, and use other legal and financial tools necessary to reduce the tax burden. 

It is quite possible that appropriate estate planning will reduce your tax burden by thousands or even tens of thousands of dollars.  The best part is you do not have to do any of the research into tax law and planning.  Rather, your Certified Estate Planner™ and CERTIFIED FINANCIAL PLANNER™ Professional can handle this challenge on your behalf, ensuring you do not pay more in taxes than necessary.

The CERTIFIED FINANCIAL PLANNER™ Professionals and CERTIFIED ESTATE PLANNERS™ at The Normandy Group offer serious financial planning for today’s complex world.  By combining tax, financial, and estate planning strategies we can help you achieve your goals. Contact us today for a complimentary consultation.

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Derek Landis