Take These Steps To Insure Your Estate Plan is a Success
Creating an estate plan is one of the most important things you can do for yourself and your family. However, simply having documents in place is not enough. Your estate plan is much more likely to be successful when you recognize and avoid the most common mistakes. Here are seven steps you can take to make sure your estate plan works the way you intend.
1. Education and Communication
One of the biggest mistakes families make is failing to communicate about their estate plan. Your heirs and beneficiaries should have at least a general understanding of what to expect. This does not mean you need to share every detail of your finances, but your family should know that a plan exists, where the documents are located, and who to contact when the time comes.
Sit down with your loved ones and explain your wishes. Let them know who your estate planning attorney is, where your important documents are stored, and what roles you have assigned to key people like your executor, trustee, or power of attorney agent. Education and open communication prevent confusion, reduce conflict, and help your plan succeed.
2. Prepare for Family Conflict
Even in the closest families, money and inheritance can create tension. If you suspect that certain decisions in your estate plan might cause disagreements, address those concerns head-on. Talk to family members individually if necessary. Explain the reasoning behind your choices.
Consider including a no-contest clause in your will or trust if you are concerned about potential challenges. You can also use a mediator or family meeting to work through sensitive topics. The goal is not to avoid difficult conversations but to have them now, while you are still here to provide guidance.
3. Plan Ahead for Gifting
Gifting during your lifetime can be an effective way to reduce the size of your taxable estate and allow your loved ones to benefit from your generosity while you are still alive to see it. However, gifting requires careful planning.
Be aware of the annual gift tax exclusion, which allows you to give a certain amount per person per year without triggering gift tax reporting requirements. If you plan to make larger gifts, work with your estate planning attorney and tax advisor to structure them properly. Consider whether gifts should be made outright, through trusts, or through other vehicles like 529 education savings plans.
4. Make Sure You Understand the Plan
It may sound obvious, but many people sign estate planning documents without truly understanding what they say. Do not just nod along when your attorney explains the plan. Ask questions. Make sure you understand how your assets will be distributed, what happens if a beneficiary passes away before you, and how your plan addresses taxes, creditors, and other potential issues.
If something in your plan does not make sense to you, it is unlikely to work the way you expect. Take the time to read through your documents and discuss any concerns with your attorney. A good estate planning attorney will welcome your questions and make sure you are comfortable with every aspect of your plan.
5. Get Organized and Prepare
Your estate plan is only as good as the information behind it. Take the time to create a comprehensive inventory of your assets, including bank accounts, investment accounts, retirement accounts, real estate, business interests, life insurance policies, and personal property of significant value.
Make sure your beneficiary designations on retirement accounts and life insurance policies are up to date and consistent with your overall estate plan. Gather important documents like deeds, titles, account statements, and insurance policies in one secure location. Let your executor or trustee know where to find everything.
6. Create a Business Succession Plan
If you own a business, your estate plan must include a business succession plan. Without one, your business could be forced to close or be sold at a fraction of its value when you pass away or become incapacitated.
A business succession plan outlines who will take over the business, how the transition will occur, and how the business will be valued. It should address management succession, ownership transfer, buy-sell agreements, and funding mechanisms like life insurance. Whether you plan to pass the business to a family member, sell it to a partner, or transition it to key employees, having a plan in place is essential.
7. Fund Your Trusts
One of the most common and costly estate planning mistakes is creating a trust but failing to fund it. A trust only controls assets that have been transferred into it. If you create a revocable living trust but never re-title your bank accounts, investment accounts, or real estate into the name of the trust, those assets will not be governed by the trust terms.
Unfunded trusts are one of the leading causes of estate plans failing to work as intended. Work with your estate planning attorney to make sure all appropriate assets are properly titled in the name of your trust. Review your trust funding periodically, especially when you acquire new assets.
Your estate plan represents your wishes for your family and your legacy. Taking these seven steps will help ensure that your plan works the way you intend and that your loved ones are taken care of when the time comes.
If you need help creating or reviewing your estate plan, contact our office today to schedule a consultation.
