10 Costly Estate Planning Mistakes (And How To Save Your Family From Them)

What happens when you die? That could be an existential question as well as an important financial one.

You need to consider who gets what when it comes to your property and ensure your loved ones are prepared financially and not left with nothing once you're gone.

As you navigate your necessary estate planning decisions, here are a few mistakes you’ll want to avoid.

A will is vital to your estate planning as it legally verifies how your property — a house, high-yield savings accounts, jewelry, and so on — should be distributed.

It also establishes who should manage your estate and care for minor children. Without a will, the probate court will decide how your property will be distributed. This can be a long and expensive process for your family or whoever is dealing with your estate. 

It also means your heirs won't receive any inheritance until the estate has gone through probate.

You may have important accounts such as retirement accounts, bank accounts, or even a life insurance policy.

You need to name beneficiaries for these accounts. A beneficiary is the person who will take over the accounts when you pass away. A beneficiary can be anyone of your choosing, but they must be named to take possession of your accounts.

If you don't clearly identify your accounts' beneficiaries, you could cause issues for your inheritors.

You may have taken the important step of naming beneficiaries, but have you updated that list lately?

Designating a beneficiary isn’t a set-it-and-forget-it act; you should revisit your beneficiaries regularly. For example, you may have named older siblings the beneficiaries when you opened an IRA in your 20s, but one may have since passed away.

You’ll also want to change beneficiaries as your children get older and become of legal age to make sure they’re inheriting the property you want them to receive.

Your beneficiaries aren’t the only aspects of your estate that need to be updated regularly.

All of your documents must be up to date to reflect any changes in your life or the lives of those handling your estate.

Remember to account for any deaths of your executors or beneficiaries. It’s essential to make changes as your children get older, and you no longer need a guardian named in your will or other documents.

Taxes can be a big issue when it comes to your estate. And taxes can be a headache for your beneficiaries if your accounts and property aren’t in order.

It may be a good idea to talk to an accountant, who can go over all the issues you may need to consider for the distribution of your estate.

An accountant or trust and estate attorney can explain what taxes your beneficiaries may have related to their inheritance. They can also suggest ways to mitigate the tax burden or set aside money to cover the cost of taxes.

A power of attorney document can be important to your estate planning even before you die.

The person or persons who have power of attorney can make decisions for you and your estate if you become incapacitated for some reason.

It’s important to give power of attorney to someone for financial decisions. You should also have a medical power of attorney document so that a designated person can make medical decisions for you when you can't make those for yourself.

There can be a lot to document regarding your estate regarding your will, financial accounts, life insurance, and property.

Consider creating a binder or box with all the files someone would need in case of your death to help them navigate the execution of your wishes. 

If you have named an executor of your estate, you may give them a flash drive with digital copies of all these documents and a list of your computer passwords.

Remember to include your will and a living will, power of attorney, trust, financial documents, property deeds, and any other items you may want your beneficiaries to know. You may also want to provide a list of your computer passwords.

You don’t want your beneficiaries to be confused about what's expected of them after you die.

While it may not be easy, make sure you have honest discussions with your beneficiaries about issues like your home, accounts, and any other money or items they could inherit.

It’s also important to discuss your plans with any guardians you will set in place for your minor children if something happens to you.

A trust is a legal vehicle in which you, the grantor, give a trustee the right to hold assets on behalf of your beneficiaries.

A trust could be a good option to settle your estate easily after you die. A trust can minimize taxes, protect your assets, and avoid probate court.

There are several types of trusts, so you should discuss your plans with an attorney, accountant, or financial planner to determine what kind you need and how it will work in conjunction with your will.

You’ll also want to ensure that your trust is clearly stated as part of your estate to avoid confusion for your beneficiaries or executors.

A relatively new aspect of estate planning is a digital estate plan.

This type of plan includes who will take over your email or social media accounts upon your passing. It could be especially important if you’ve monetized a social media stream or website.

You could also have essential documents in email accounts that a beneficiary or executor may need to access to settle your estate.

You should also consider issues related to your computers, phones, or other electronic devices that an executor may need access to to wind down accounts.

Estate planning is an important part of your financial planning, just like real estate planning or preparing for retirement.

You'll do your heirs a tremendous service by deciding how you want your property, taxes, charitable giving, and any other aspect of your life settled after you pass away.

Remember to discuss your plans with your beneficiaries and executors so they know what you want to do with your estate after your death.