Estate planning is one of the most important steps you can take to protect your family and your legacy. However, many people make avoidable mistakes that can lead to unnecessary stress, expense, or even family conflict. Here are five common estate planning mistakes and how to address them:
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Failing to Create an Estate Plan
Without an estate plan, Arizona’s intestate succession laws decide how your assets are distributed. This default distribution scheme may not align with your wishes, especially if you have a blended family or if you are estranged from some of your family members.
Solution: Start with the basics. Create a will or trust to ensure your assets are distributed according to your preferences. Consider consulting our estate planning attorneys for a comprehensive plan that addresses all your needs. We offer free initial consultations to learn about you and your situation and offer options for paths forward.
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Not Updating Your Plan
Major life events like marriage, divorce, the birth of a child, or significant financial changes can render your estate plan outdated.
Solution: Review your estate plan every few years or after major life changes. Regular updates ensure your plan reflects your current situation and intentions.
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Overlooking Beneficiary Designations
Many assets, such as retirement accounts and life insurance policies, pass directly to beneficiaries. If these designations are outdated, your plan may not work as intended. People also often don’t realize that beneficiary designations trump whatever is in your will. If B is listed as the beneficiary of an account, but A is given the account in your will, B will prevail.
Solution: Periodically review and update beneficiary designations to ensure they align with your overall estate plan. This is crucial for life insurance especially since creditor protections can be eliminated if your beneficiary designation fails and the proceeds are paid to your estate instead.
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Not Planning for Incapacity
If you become unable to make decisions due to illness or injury, your family could face legal hurdles like guardianship or conservatorship to manage your affairs.
Solution: Include powers of attorney and healthcare directives in your estate plan. These documents empower trusted individuals to act on your behalf if you’re incapacitated without court intervention.
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Ignoring Tax Implications
Improper planning can lead to unnecessary estate or income taxes, reducing the inheritance your loved ones receive.
Solution: Work with our attorneys and a financial planner to implement strategies that minimize taxes, such as gifting, trusts, or charitable contributions. For example, for certain assets like retirement accounts, you may wish to have individuals as beneficiaries rather than your trust since trusts are taxed at higher rates. However, there may be other benefits that outweigh the additional taxation.
By addressing these common mistakes, you can create an estate plan that provides peace of mind and ensures your wishes are honored. For personalized advice tailored to your unique situation, contact us today to schedule a free consultation.