Estate planning is one of those areas where it’s easy to make mistakes if you aren’t careful, and the stakes are particularly high. Read on to learn how to create an estate plan that carries out your wishes while avoiding pitfalls.
1. Create an estate plan.
The most common estate planning mistake is failing to plan at all. Don’t be like most American adults, who don’t have a will or estate plan. Creating a plan with the assistance of an estate planning attorney will help to ensure that your wishes are carried out properly. It can reduce stress and headaches for your loved ones after you pass.
2. Make sure your estate plan is up to date.
Too many people either don’t appreciate the importance of keeping their plan up to date or they just don’t get around to it. Some serious problems that could arise with an out-of-date plan include:
The wrong (outdated) beneficiaries are listed so your assets won’t go to the people whom you would want to inherit them. For example, just think about what it would be like for your estate to unintentionally go to your former spouse instead of your current spouse.
Perhaps your children, who were minors when you wrote your will, are adults now. That would negate the need for a guardian and possibly a trust, depending on your specific situation.
What if the executor you named 10 years ago is no longer alive? See “Plan for contingencies” below for guidance on naming backups if a named executor or trustee is no longer available to take on that critical role.
You can avoid any of these awkward or painful scenarios by regularly reviewing your plan. You should do this every few years or after major life events, such as a family birth, death, marriage, or divorce.
3. Be careful who you appoint to key roles.
The critical roles that are integral to the estate planning process, in terms of people whom you would assign to certain tasks, include: an executor, a power of attorney, and a healthcare proxy.
Your executor plays a central role. This person will be responsible for managing assets, paying debts, and distributing property, among other functions. They should be trustworthy, reliable, and responsible.
The person to whom you give power of attorney will be entrusted to manage your legal and financial affairs. Like your executor, this person should be trustworthy, highly responsible, and live close enough to you to enable them to manage your affairs in person.
The person to whom you grant your healthcare proxy will be entrusted to make medical decisions on your behalf if you can’t communicate or make those decisions yourself.
4. Include your digital assets in your estate plan.
Today, so much of our financial lives is stored or accessed online. A complete estate plan must include information and access to online accounts, both financial and non-financial. For instance, your email account and social media profiles should probably be closed after you die. Your estate planning documents should include clear instructions and secure access details to online banking and investing accounts as well as your cloud storage.
5. Plan for contingencies.
Always name contingent beneficiaries and contingent decision-makers. You never know if your primary beneficiaries or a decision-maker, such as an executor, guardian, or trustee, will die before you or no longer be able to serve. So, be thorough now and plan for all contingencies.
6. Incorporate charitable giving or planned giving if they are a priority.
If it is important for your charitable intentions to continue after you die, include those in your estate plan. You could provide direct gifts to charities, create a charitable trust, or, depending on the size and complexity of your estate and your charitable intentions, you might create a donor-advised fund or a family foundation.
7. Communicate your plan well.
All this planning is so important, but equally important is communicating your desires well to your loved ones before you die. Your estate plan shouldn’t contain major surprises. That way, you’ll avoid hurt feelings or resentments as your estate is settled.
Your loved ones should also know who to contact when you die. Consider writing and updating a letter of instruction to your children and fiduciaries. The letter should include a list of assets, and the names, phone numbers, and addresses of your estate planning team.
A thoughtful estate plan isn’t just a legal exercise — it’s a gift to the people you care about. By keeping your documents current, choosing the right decision makers, and communicating your intentions clearly, you make it far easier for your loved ones to carry out your wishes with clarity and confidence.