Ann Bowey for the Journal-Advocate
By the time you reach retirement age, you may have accumulated a 401(k), an IRA, and other investment accounts, along with insurance policies and physical property. You will use some of these assets to support your retirement, but the rest may end up in your estate, which is why an estate plan is so important.
Therefore, to leave a legacy for your family and the philanthropic groups you support, you need a comprehensive estate plan and you must avoid making mistakes. Here are some of the most common:
• Procrastinate: Estate planning and its implications for our mortality may not be a pleasant topic to think about. However, postponing your estate plans can be risky. If you were to pass away or become incapacitated without undertaking any estate planning, the results could be costly for your loved ones. One possible consequence: If you haven’t created at least a basic, simple will, the courts could decide how to divide and distribute your assets, and they may do so in a way you wouldn’t want.
• Failure to update wills and other documents: Drafting a will and other legal documents, such as a living trust, is an important step in estate planning. But you shouldn’t just create these arrangements and forget about them. Changes in your life and among your loved ones—deaths, divorces, remarriages, new children, and more—may create the need to update your estate plans, so it’s a good idea to review them periodically.
• Failing to update beneficiaries: Similar to updating your will to reflect changes in your life and family situation, you may also need to update the beneficiaries listed on your financial accounts and insurance policies. These designations carry a lot of weight and can even supersede the instructions in your will, so you’ll need to make sure they are up to date and accurate.
• Failure to properly title assets in a trust: Depending on your situation, you may benefit from establishing a living trust, which may allow your estate to avoid the costly and time-consuming probate process. A living trust also helps you have control over how and when you want your assets to be distributed. However, you must retitle your assets to the trust for it to be effective.
• Not choosing the right executor: An executor carries out your wishes based on the instructions you have given in your will or trust documents. But fulfilling the duties of an executor is not as simple as, say, following a recipe for a basic meal. Consequently, while you may want to choose a close family member as your executor, you should ensure that this person is competent, good with details, and not overwhelmed by the financial and legal issues involved in settling an estate. If his initial choice does not have these skills, he may need to find a responsible person outside the family.
Finally, here’s one more mistake: doing it alone. Estate planning is not an activity you can do yourself. To help ensure that your estate plan addresses all of the issues involved, you will need to work with legal counsel and possibly your tax and financial professionals as well.
Taking the time and effort can help you avoid many of the mistakes that threaten the effectiveness of estate plans, and the fewer mistakes you make, the better off your beneficiaries will be.
This article was written by Edward Jones for use by your local Edward Jones financial advisor. Edward Jones, SIPC member. Ann Bowey is a financial advisor with Edward Jones in Sterling.
Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation.
