PEACE OF MIND
Your estate plan needs to keep up with you. Documents you signed years ago may still be legally valid, but that does not necessarily mean that they still reflect your life today or that they will work the way you expect when they are needed.
Here are six common estate planning traps that show up over time, along with six questions you can use as a simple audit.
Six estate planning traps (and the questions that catch them)
Most people do not think of estate planning in terms of time passing. They think in terms of documents — something you sign once, put away, and check off the list.
But estate planning is not static. It works well only when it reflects your current life, relationships, assets, and wishes. The good news is that many of these issues are easy to fix when you know what to look for.
• Outdated beneficiaries
Beneficiary designations determine who receives certain assets, such as retirement accounts and life insurance policies. The trap: An outdated beneficiary designation on a 401(k), individual retirement account, life insurance policy, or similar account may cause money to pass to the wrong person, such as a former spouse, or someone you no longer intend to benefit.
The question: Have you reviewed your beneficiary designations and your will within the past three years or after a major life event?
• The vacant seat
When you name an executor or a trustee, you choose the person who will carry out your wishes.
The trap: You named an executor or trustee but did not name a backup.
The question: If your first choice cannot serve, have you named at least one backup—and are you confident that they are willing and able to serve?
• Digital lockout
Many important records are now online: bank accounts, email, photos, subscriptions, etc.
The trap: Your family cannot access key digital accounts or information needed to settle your affairs.
The question: Does your executor know where your documents are stored and how to find your securely stored digital account list and access instructions?
• The incapacity gap
A good estate plan covers more than what happens after death. Many families struggle most during a period of incapacity, i.e., when someone is alive but cannot manage finances or make medical decisions.
The trap: You have no incapacity planning documents in place.
The question: Do you have a signed power of attorney that would allow a trusted person to handle bills, banking, and real and personal property if you became incapacitated? Do you have healthcare decision documents for medical decisions?
• Verbal vs. legal intent
Good intentions and family understanding do not always translate into preferred legal outcomes, especially in blended families.
The trap: Vague phrases such as “to my descendants” may accidentally exclude stepchildren or create unintended results.
The question: Have you clearly specified who should inherit, including any stepchildren, in clear language that leaves as little room as possible for confusion or dispute?
• The “toxic” gift
An inheritance can come with complications such as liens, unpaid property taxes, or other costs that may make an asset difficult to keep.
The trap: Heirs inherit property that is encumbered or expensive to maintain, forcing a stressful sale or unexpected out-of-pocket costs.
The question: Does any asset you plan to leave behind have hidden costs, and will your heirs have a plan for handling those costs?
When to review your estate plan
If your plan was created years ago, it may still be legally valid. But a plan works well only when it matches your life and circumstances.
A good rule of thumb is to review your estate plan every three to five years or sooner if you have experienced a major change.
A short check-in now can prevent delays, confusion, and unintended results later and give you peace of mind that your plan still protects the people you care about.
This article is provided as a service from the Law Office of Lasca A. Arnold, PLLC.
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