To protect wealth and provide for loved ones, proper estate planning is vital. However, there are some common pitfalls around estate planning that can lead to unexpected tax liabilities, family disputes or the erosion of assets’ value over time.
Have Conversations Early
Putting off estate planning, and discussions around it, is a frequent mistake. It’s a good idea to have conversations with those likely to be most affected by the estate plan as early as possible, for example business partners, family members and any chosen trustees or executors. Ensuring clear communication now reduces the likelihood of misunderstandings or conflicts when the time comes later on.
Update Wills Regularly
Keeping a will updated is crucial, especially following important life changes such as getting married, having children or getting divorced. A will should also be relooked at after any major regulatory or tax changes. Once a will has been made, it’s generally advisable to review it every few years.
Don’t Forget Digital Assets
When making an estate plan it’s important not to forget digital assets. These include online bank or investment accounts, email and cloud storage accounts, social media accounts, and cryptocurrencies and digital wallets. If no instructions are left, loved ones could find it difficult to access these accounts and manage them. As part of estate planning, a list of digital assets held should be created, along with details of how to access and manage them. This list should be kept in a safe place and updated regularly as necessary.
Make Arrangement for Incapacity or Illness
Professionals in the field, such as Edgar Paltzer, know that estate planning should also involve making arrangements for mental incapacity or critical illness. If someone hasn’t been appointed ahead of time to make health and welfare decisions and manage finances on a person’s behalf, the responsibility will fall to the court.
Resist Making Assumptions About Joint Assets
It’s not unusual for people to assume that jointly owned assets (such as property) will pass to the surviving owner without any issues. However, this is not always the case. For example, if the property is owned as tenants in common, there’s no right of survivorship, meaning that it’ll pass to whoever is named as a beneficiary in a will. If there is no will, the rules of intestacy will apply, meaning the property could end up passing to someone the deceased would not wish it to.