It is a common misconception that estate planning is only beneficial to people who have large assets. The truth is that estate planning is beneficial to everyone. Most people own at least one valuable item. This can include a house, vehicle or even simply bank accounts. Without proper estate planning, those assets may not go to the people you want them to go to.
Understanding the importance of estate planning is only part of the process. If you are not careful, you can make costly mistakes with unintended consequences. Avoid these mistakes while setting up your affairs.
Failing to update your estate plan
According to FindLaw, a common mistake that many people make while planning an estate is failing to update the plan when changes occur. It is important to review your estate plan regularly in order to reflect changes that happen in your life.
Failing to plan for long-term care
Many people fail to plan for long-term care or an unforeseen disability. This can expose you to financial risk in the future. It is important to make designations for such a situation as soon as possible, even if you think it will never happen.
Establishing ownership as opposed to inheritance
Some people think it is a good idea to put their children on the deed of their house or vehicle while they are still alive. This may result in the Internal Revenue Service viewing the addition as a gift, instead of as an inheritance. This is important because it determines how much tax liability passes on to your children.
The importance of proper estate planning cannot be understated in terms of how it will affect your loved ones after you are gone.