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3 Simple Mistakes That Can Derail Your Estate Plan

If you're considering using a DIY estate planning service or have already created a plan that leaves you uncertain, it's crucial to understand how these three common mistakes can jeopardize your estate plan and leave your family dealing with costly complications.

We often encounter clients who seek our assistance in reviewing estate plans they crafted online or with attorneys lacking estate planning expertise. Despite hoping for a quick and budget-friendly solution, they're left questioning whether their "affordable" plan will truly achieve their objectives or, worse, burden their loved ones with unintended consequences. Upon review, we frequently uncover poorly designed plans riddled with simple yet catastrophic errors, errors that may go unnoticed until it's too late for the individual.

While it might appear straightforward to draft a trust online or have a tax attorney prepare your will, constructing an effective estate plan requires specialized training and experience. Details that seem inconsequential to the untrained eye can profoundly impact the final outcome of your plan.

In many cases, clients who opt for DIY plans find themselves spending more to rectify costly mistakes. If these errors go unnoticed during your lifetime, your loved ones will bear the financial and emotional burden of resolving them after your passing.

Here are the three biggest mistakes I see when reviewing DIY and low-cost estate plans:

Leaving Assets Outright to Loved Ones 

One of the most common missteps in estate planning is directly distributing assets to beneficiaries upon your death. This approach presents several risks:

  • Assets are vulnerable to creditors once they leave your estate.

  • Beneficiaries may misuse the funds without oversight.

  • In the case of minors, a court will determine asset management, potentially appointing a guardian against your wishes.

Instead of transferring assets directly to beneficiaries, consider establishing a trust for their benefit. Trusts allow you to designate asset managers, safeguard assets from creditors, and protect beneficiaries' financial well-being.

Not Creating an Asset Protection Trust

While trusts offer invaluable asset protection, this protection is contingent on assets remaining within the trust. A common mistake is specifying that assets should exit the trust and transfer to beneficiaries at a certain age. Despite appearing innocuous, this approach exposes assets to future legal and financial risks.

Consider creating an Asset Protection Trust to safeguard assets indefinitely, providing enduring support to beneficiaries. Despite the misconception that trusts are only for significant estates, even modest assets benefit from the protection and growth opportunities they afford.

Forgetting to Update Beneficiary Designations

An easily overlooked yet critical error in DIY planning is neglecting to update insurance policies and retirement account beneficiaries to align with your estate plan. While wills and trusts are vital components, updating beneficiary designations ensures your largest assets integrate seamlessly into your plan.

Leaving outdated beneficiaries on insurance and retirement accounts circumvents your estate plan, directing assets directly to listed beneficiaries, irrespective of your intentions. Regularly reviewing and updating beneficiary designations prevents unintended outcomes and ensures your plan's coherence.

Estate Planning That Works

In order to make sure your estate plan truly works the way you intend it to, it’s essential that all of your assets are reviewed and accounted for to make sure that any accounts you have reflect the name of your trust or other estate plan method. That’s why at Kata Law PLLC we always create an inventory of your assets and follow up with you to make sure your assets are updated into the name of your trust. We can even update your assets for you, so you can rest assured that every piece of your plan works together. 

If you're thinking about using a DIY estate planning service or had an estate plan created by an attorney in a different practice area,  it's crucial to check your plan for these three simple but major mistakes. Otherwise, your estate plan might end up causing more problems than it solves, leaving your family in court and conflict.

That’s why we offer to review your current estate plan during an Estate Planning Session. During this session, you'll have the opportunity to discuss your concerns, learn how your current plan will (or won’t) work for you, and if you don’t feel confident in your current estate plan, we’ll create a new comprehensive plan for you that will provide the protection and support your family needs for years to come.

Don’t let a simple estate planning mistake derail your plans for your family.  Click here to schedule your Estate Planning Session. Your loved ones will thank you for it!

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