Many individuals in Michigan and other states focus on financial and retirement planning but neglect to address their estate planning adequately. However, delaying the estate planning process can lead to costly mistakes. Avoid common mistakes to ensure your assets are protected and your final wishes carried out.
1. Having no plan
Almost everyone can benefit by having a will, even if you don’t have significant wealth. If you have no will or other plan for your assets, the state’s inheritance laws will determine who receives your assets, even if it means they go to a distant cousin who never knew you existed. A will also lets you name a legal guardian for your children, ensuring their care if something unexpected should happen to you.
2. Thinking only older people need to plan their estate
Many people mistakenly think they don’t need an estate plan until after they retire. However, sudden illnesses or accidents can happen at any age, regardless of your health. An estate plan is essential, especially if you have dependents or significant assets. If anything unforeseen happens, your estate plan can protect your loved ones financially.
3. Having a narrow view of your estate planning needs
Estate planning covers more than simply distributing your assets upon your death. It also includes components such as a legal or healthcare power of attorney who can make critical decisions if you become incapacitated. An estate plan might also include one or more trusts, which can protect your assets in case of divorce, bankruptcy or other issues.
4. Thinking there is only one type of estate planning
Some individuals think that estate planning includes a will and nothing else. However, you can set up a living trust to manage assets for your heirs while alive. If you want to provide for a dependent with special needs, you can use a trust to set aside assets that will not interfere with government benefits. Trusts have many features that can help you reduce estate taxes, avoid probate and other financial objectives.
5. Not updating your plan
Setting up your estate plan involves more than a one-time exercise. As your life circumstance evolve, so should your estate plan. Regularly review and update your estate planning documents when you go through life events such as having children, buying property, divorce or remarrying. Neglecting this step can result in negative consequences, such as an ex-spouse receiving the home intended for your current spouse and other issues.
Although estate planning may seem daunting, the consequences of avoiding it can be significant. Take time to navigate the complexities of an estate plan so that you can make proactive, informed decisions and ensure your final wishes are honored.