Estate planning: What you need to know to avoid problems down the road
You might have made plans for retirement. Maybe you have been saving money in a 401(k) or an IRA? That’s a responsible move, but do you have a will? Have you thought about who will receive your assets after you pass away?
If you haven’t thought about it or simply put it off for another day, you’re not alone. More than half of all Americans have not created a will, according to a Fox Business article about estate planning mistakes. Failing to have a will is one of the top mistakes people make in their estate planning. If you die without one, the state will make major decisions on your behalf such as who gets your property.
Who needs a will?
You might think you don’t need an estate plan because you don’t make a lot of money and don’t have many valuable assets. If you’re like most people, however, you probably have at least some money in a bank account. You probably own a car and a home. These are all items of value that can be passed on after you’re gone. Without a will, your property will be distributed according to the laws of intestate succession. In plain language, this means the state of Arizona will create a will for you and make the big decisions.
Estate planning mistake No. 1: Not having a will
If you don’t have a will, contact an attorney as soon as possible to find out how to create one. A will is a legal document that spells out your wishes in regard to the distribution of your property and the care for any children you have who are minors. You don’t have to be a millionaire. You will need an estate plan put down in writing if you have any assets or dependents.
Once you have a will, you will need to revise it as life goes on and circumstances change. Failing to update an estate plan is another common mistake.
Estate planning mistake No. 2: Not choosing or updating beneficiaries
If you have a retirement plan such as a 401(k) or an IRA, you will have designated a beneficiary named in the documents. (This is also the case if you have life insurance). Often, the beneficiary is the spouse. What happens if you get divorced and then remarry? If you neglected to change the beneficiary to your new spouse, your ex-spouse will be legally entitled to the assets after your death. It’s not uncommon for a spouse of a deceased person to get into drawn-out and expensive legal battles with the ex-spouse over assets, simply because the beneficiary named on the document was never changed. There are also tax implications involved in not naming a proper beneficiary. The taxes may have to be paid sooner, which will result in an unnecessarily large income tax liability.
When minor children are involved, some people make the mistake of naming their appointed guardian as a beneficiary. You should leave the asset to a trust for the children to ensure they get the money.
Estate planning mistake No. 3: Overlooking power of attorney for adult children
It’s another unpleasant thought, but you should have a plan in place if something debilitating happens to your children who are over 18. Getting powers of attorney when your children turn 18 will allow you to speak to a doctor about your adult child’s health care after an accident or illness. It also will allow you to take care of your child’s bills or make investment decisions if they are out of the country or otherwise unavailable and need your assistance.
Why you need to talk with a lawyer
Estate planning can seem overwhelming, but it can be a smooth process with the help of an experienced attorney. Don’t put off critical planning for your future. Call today to set up an appointment with an experienced estate planning lawyer in Arizona. We can ensure your paperwork is filled out properly and up to date. We will help you avoid mistakes. Contact Brown & Jensen for a consultation.