Estate planning is the forgotten element of comprehensive financial planning. Why? It’s obvious, right? We don’t want to ponder our mortality. If that weren’t bad enough, it also costs money, takes time, and requires us to deal with the sometimes-messy task of deciding which of our loved ones will inherit our remaining assets. Understandably, most people view estate planning as a massive chore. But, like any chore, procrastination is not a long-term solution.
Let’s look at a few mistakes to avoid when tackling the vitally important task of creating a comprehensive estate plan.
Failing to Plan
If you don’t have one, now is the time to establish one. Even if you don’t think you need one, it’s crucial to have one in place.
Not Including Family or Friends
Estate planning inherently involves other people. Bring family and friends into the planning process to facilitate and avoid posthumous disputes for your surviving loved ones.
Having Just One Beneficiary
You should always have more than one beneficiary designated for any of your assets. In the event that a beneficiary passes away before you do, you’ll want to have a contingent beneficiary. This is who would be next in line to your estate or any given asset. Ideally, you should have more than one contingent beneficiary listed.
Forgetting about Power of Attorney or Healthcare Representatives
If your Living Will doesn’t designate a Power of Attorney or a Healthcare Proxy, make sure you have standalone documents that appoint a trusted person or people to make important financial and medical decisions for you.
Ignoring Digital Assets
Be sure to include a Digital Estate Plan that lays out how you’d like all your digital assets to be handled after you pass away. This could be anything from social media accounts, to online banking, email accounts, and more.
Improperly Funding A Trust
A trust is an excellent component to have in virtually any estate plan, but it could all be for naught if you don’t properly fund it. Creating a trust is useless until it’s funded.
Not Accounting For Taxes
Estate tax liability can put a huge dent in what you plan on leaving your beneficiaries. In addition to your estate owing taxes before beneficiaries are paid out, you also want to think about how your gifts will impact individual heirs too. However, keep in mind that the “Estate Tax” affects a small number of individuals’ estates. For 2022, the estate tax only applies on estates in excess of $12.06 million.
Not Keeping Your Plan Safe
In our digital world, estate planning documents remain largely analog. Keep estate planning documents in a safe, secure place. Don’t forget to let your spouse, trusted family member, or friend know where the documents are. Your estate plan is not very helpful if your heirs can’t find it.
Infrequently Updating Your Plan
Unfortunately, Estate Planning is not a set-it-and-forget-it deal. You need to keep it current and make sure it reflects all of your life changes as they come. As we mentioned earlier, any major life event could be cause for an update - this could include marriage, divorce, birth of a child, or death of a family member or beneficiary.
This is a lot to absorb, but we are always ready and able to assist you with any estate planning needs. Whether you need to create a new plan or update your existing plan, now is the time to tackle this essential part of your household’s financial well-being.
Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Multnomah Group does not provide legal or tax advice.