Whichever stage of life you’re in, you need an estate plan. It can be short and simple or longer and more complex, depending on your situation. Avoid making these four important estate planning mistakes:
1. Not having an estate plan
This is the cardinal sin of the estate planning process. Not having an estate plan in place will make it extremely difficult for your surviving loved ones to manage your affairs. They will already have so much to deal with emotionally after your death, so taking steps to mitigate difficulties on the financial side of things can really be helpful. Be sure to not only have an estate plan established, but also gather any important documentation, passwords, valuables, etc. that may be important throughout the process. As an addendum to this, be sure to keep your estate plan up to date throughout the years.
At its simplest, you should at least have a last will and testament. If you pass away without a will, this is known as intestate succession. It becomes up to the state to decide how to divide your assets and usually takes longer to settle your estate in probate court. Under Virginia intestate succession law, if you are married and have kids, one-third of your assets will pass to your spouse and the rest to your children. If you are married without kids, all of your assets will go to your spouse.
The N.C. Intestate Succession Act is a twelve-page, complex law that lays out the lines of inheritance when there is no will. Each state has its own intestate succession laws. Save your family the hassle and cost of having your estate settled by the state by drawing up an estate plan today.
2. Neglecting power of attorney and healthcare representative
If you are incapacitated, a power of attorney can make the hard decisions that may be too difficult and contentious for your family to make on their own. Be sure to put someone you trust into this position, especially as durable power of attorney. Discuss this position with your family or close friend who will be able to assist you with this, and make sure they understand the responsibilities that come along with this. POAs are typically responsible for financial transactions, decisions about healthcare and real estate, and handling government/retirement benefits. The most common situations in which you need a power of attorney include:
- In older age
- When dealing with a serious health crisis
- Mental or physical incapacity
3. Not planning for dependents and beneficiaries
Be sure to consider the future needs of your children, spouse, or other beneficiaries when you are building your estate plan. You’ll want to ensure that they will receive their fair share of your wealth so that they are taken care of after your death. As the years pass and your living situation changes, your beneficiaries may change as well, so be sure to keep your estate plan up-to-date to accommodate life changes.
4. Not planning for disability or long-term care
Your estate plan may not necessarily come into play upon your death. It could also be used to dictate your will if you are disabled or require long-term care at a nursing home or other facility. Be sure that you have funds set aside to take care of these needs, and integrate disability insurance into your estate plan as well.
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