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5 common estate planning mistakes for you to avoid

On Behalf of | Nov 1, 2022 | Estate Administration, Estate Planning

If you have not yet prepared your estate planning documents, resolve not to put this responsibility off any longer.

Organizing your thoughts in advance helps smooth the way. Here are five common estate planning mistakes and how you can avoid them.

1. Failing to plan for disability

As we age, most of us will face health concerns of some kind. You may become disabled and require ongoing care. The cost of either nursing home or home health care is high: over $100,000/year for a private room in a nursing home, for example. Do not wait to look into long-term care insurance since the price increases every year.

2. Not planning for minor children

If you have minor children, remember to address their care in your will. In the event that you and your spouse should die unexpectedly, you need to designate a guardian. Get life insurance and provide instructions in your will as to the use of this money to support your children.

3. Not recognizing tax implications

Some of the assets you leave to your beneficiaries may have tax consequences. An inherited account such as a 401(k) is subject to a required minimum distribution, or RMD. If you convert to a Roth account while you are still alive, your beneficiary can avoid having to pay taxes upon withdrawal.

4. Failing to ensure liquidity

Whether your estate will be split among your heirs after your death or you are passing down a family business, you need to plan for asset liquidity. Life insurance will create liquidity to pay off your debts and divide your wealth.

5. Not updating your documents

Major changes occur in life, such as a divorce, a marriage or the birth of a grandchild. Changes like these will affect you so remember to update your estate planning documents every three to five years.