Estate planning ensures that the courts will protect and distribute your assets according to your wishes after you pass away. However, it is important to review your estate plan regularly to identify any potential shortcomings that could undermine your intentions.
Consider the four most common ways your estate plan might be lacking and how to address these issues proactively.
1. Insufficient beneficiary designations
Failing to update beneficiary designations on accounts such as life insurance policies, retirement plans or investment accounts can result in unintended consequences. For instance, if you named a former spouse as a beneficiary and failed to update it after a divorce, your assets may end up in the wrong hands. To rectify this, review and update beneficiary designations regularly to align with your current wishes.
2. Neglecting digital assets
Failing to address digital assets could make it difficult for your loved ones to access important accounts or retrieve sentimental items stored digitally. Ensure your estate plan accounts for online accounts, cryptocurrency, social media profiles and intellectual property rights. Provide clear instructions on how to access and manage these assets, while also considering privacy concerns.
3. Overlooking incapacity planning
While estate planning often focuses on post-mortem matters, it is equally important to consider potential incapacity during your lifetime. In the event of an unforeseen accident or illness that leaves you unable to make decisions for yourself, having a plan in place can alleviate stress and confusion for your family. Consider executing documents such as a durable power of attorney and a healthcare directive, designating trusted individuals to make financial and medical decisions on your behalf.
4. Ignoring family dynamics
A common mistake is assuming that your loved ones will cooperate harmoniously when it comes to asset distribution. However, family dynamics can be complex, and even minor disagreements can escalate after your passing. To prevent potential conflicts, openly communicate with your family about your intentions and engage in proactive discussions. Consider involving a neutral third party, such as a mediator, to facilitate productive conversations and help resolve any existing conflicts.
Estate planning is an ongoing process that requires regular review and updates to protect your assets and safeguard your legacy.