Typical goals in creating an estate plan are to establish a legacy and create a straightforward guide for your heirs. Depending on how long ago you created your estate plan, it’s possible your wishes or priorities may have shifted. Your vision of your legacy and your directives may no longer be clear. That ambiguity can create additional stress and expenses for your loved ones and beneficiaries during an already difficult time. It’s wise to review your plan every three to five years. That way you can address and avoid common estate planning pitfalls in the transfer of your assets. In a recent article, Rande Spiegelman, vice president of financial planning at the Schwab Center for Financial Research, shared some potential obstacles.
Review your accounts and beneficiary designations anytime there is a major change in your life, such as a birth, death or marriage in the family. Your heirs may not get the assets you intended when this information is incorrect. It may even override the wording of your will or trust in some cases.
“A revocable living trust is one way to avoid the unwieldy and costly probate process, because your assets technically belong to the trust—even while you’re still alive,” Spiegelman noted. You should create what he calls a “pour-over will” after creating and funding the trust (by changing the title of your accounts and other assets into the name of the trust), he suggested. This states that assets not otherwise devised by your will should be transferred to the trust upon your death. Finally, be sure to name a successor trustee (in case you or another original trustee cannot fulfill the duties).
Dscussing your estate plan can be uncomfortable. Still, it’s wise to communicate as much as you can to your spouse, children or other heirs while you’re still living. Your openness about your intentions can help them manage their expectations and may reduce any confusion, conflicts or legal battles down the road.