Think back to how your life was seven years ago. Have things changed? 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 seven common estate planning traps that show up over time.
Outdated Beneficiaries
The trap: An outdated beneficiary designation on a 401(k), individual retirement account, life insurance policy, or similar account may cause money to pass to the wrong person, such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, a deceased relative, 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 such as marriage, divorce, death, or the birth or adoption of a child?
2. The Vacant Seat
The trap: You named an executor or trustee but did not name a backup. People age, move away, become ill, or may decline the role.
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
3. Digital Lockout
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?
4. The Incapacity Gap
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?
5. Verbal Versus Legal Intent
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?
6. The Unfunded Trust Problem
The trap: You created a trust but did not transfer key assets into it, leaving those assets to be administered outside the trust’s control.
The question: Are your major assets titled correctly to align with the provisions within your will or trust?
7. The “Toxic” Gift
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 your heirs will not expect, and do they have a plan for handling those costs?
Come to our June Estate Planning 101 Class:
Tuesday, June 30, 1:30 pm in Lakewood
Seats are limited, as we offer a small group setting for interactive learning.
