4 Ways to Limit Estate Planning Risks
Although estate planning involves confronting difficult subjects such as death and incapacitation, creating an estate plan does not necessarily mean risky business. A main motivator for estate planning is the desire to ensure that loved ones are taken care of after one’s death, and that any end-of-life accommodations are put in place. Inattentive or incomplete estate planning can put these wishes in jeopardy. To minimize these risks, consider the following:
1. Recognize Your Personal Estate Planning Needs
Contrary to popular assumption, estate planning does not solely revolve around inheritance, property, and assets. Estate planning is also a way to secure your end-of-life medical treatment preferences, voice your guardianship designations, and carry on a family legacy.
You may find that you lack direction when beginning your estate planning journey. It is helpful to reflect on the desired outcome(s) of your estate plan, which can vary from person to person. For example, those with children may elect to leave behind childcare instructions, a trust, or a personal message to their surviving loved ones, which can all be worked into a personalized estate plan.
2. Know the Difference Between a Revocable and Irrevocable Trust
One of the benefits of having a trust is the assurance that the funds or assets contained in the trust will be used for their intended purpose. For example, one may choose to designate a certain amount of funds toward their child’s education expenses once the beneficiary reaches a certain age. Terms in a revocable trust can be revised throughout the life of the trustmaker (also known as a “Grantor”), while terms in an irrevocable trust cannot be changed once they are created.
Note that the existence of either form of trust does not eliminate the need for a will. A balanced, well-rounded estate plan will make use of multiple estate planning documents in order to cover all ground and ensure one’s wishes are being met.
3. Don’t Hesitate to Seek Assistance
Whether you have already created estate planning documents or have not yet taken the leap, it is natural to have questions or uncertainties regarding future planning. When compared to estate plans created with the help of a professional, Do-It-Yourself estate plans are likely to be riddled with errors and may omit important details. Due to the degree of importance behind estate planning decisions, there is no room to let any funds or preferences slip through the cracks. Often, beneficiaries learn of estate planning mistakes only after it is too late.
4. Carefully Select and Review Beneficiary Designations
Beneficiary designations may change over time. For that reason, it is essential to review your designations periodically to ensure that your estate falls into the right hands. Births or deaths in the family, changes in marital status, and shifts in relationships are all reasons for which one may change their chosen heirs.
Additionally, reviewing your beneficiaries may also allow you room to prepare your loved ones for the handling of your estate. By keeping an open line of communication in regards to your estate plan, you may reduce the risk of disagreement and confusion among loved ones.