Estate planning is the process of figuring out what will happen to your family and assets upon your passing. And contrary to popular belief, it's not just for the wealthy; estate planning makes sure your wishes are followed for any of your assets, such as property, a minor child, or even a pet.
While it may be emotionally difficult to think about such a topic, putting your wishes in writing can help avoid confusion and disagreement amongst your loved ones. As you get started, here are four common mistakes to avoid.
1. Not having a plan in place
Just like you wouldn't drive a car without insurance, having a plan for your estate is vital. This is especially important for nontraditional families, whose members may include ex-spouses, new spouses, stepchildren, and adopted children. Estate planning can help prevent a major life event from creating unnecessary conflict among different family members.
2. Not knowing your options
There are various estate planning options available depending on your individual needs. Here are the primary legal documents you'll want to keep in mind:
A last will is perhaps the primary means of ensuring your last wishes are followed upon your passing. A Last Will determines what happens to your assets and how your property is distributed; it can also specify a guardian for your minor children.
A living trust allows you to transfer assets to a beneficiary and can help you avoid the probate process, which can be lengthy and costly.
A living will outlines your wishes for healthcare decisions should you be unable to decide for yourself. This can include your wishes for—or against—artificial life support. A Living Will is only effective if you are unable to speak for yourself.
A power of attorney appoints someone to represent you in legal and financial matters.
3. Not telling others what your plans are One of the most important elements of estate planning is discussing your wishes with your loved ones. Letting your family members and close friends know of your asset distribution plans and personal health choices can help prevent potential misunderstandings during an emotional time. Talk to your loved ones. Let them know what your plans and wishes are—and where your documents are located.
4. Not keeping your estate plan up-to-date
Once your estate planning documents are in place, you can relax, knowing your family and property are protected. But as time goes on, keep in mind that certain milestone events—such as a new birth in the family or a change in a relationship—may require you to update your documents.
Estate planning is recommended for everyone. Start creating your estate planning documents now; you'll have peace of mind in knowing that your loved ones will be protected and your last wishes will be known upon your passing.