In his article "Estate Planning Mistakes Every Boomer Should Avoid," author Casey Dowd enumerates some of the things that you really don't want to do if you hope to have an estate plan that will work as you intend. Here are Dowd's Big Five mistakes:
- Failing to plan for large expenses such as long term care. This may not seem like a big deal when you are relatively young and healthy, but fully 70% of us can expect to be completely incapacitated for some period of time before we die. Many of us will need care that cannot be provided in our homes in a cost-efficient way. Our options are (A) be fabulously wealthy, (B) plan ahead, or (C) fall at the mercy of governmental programs. (B) works best for most of us.
- Failing to update beneficiary designations on bank accounts, investment accounts, retirement accounts, and insurance policies. Having your will and revocable living trust agreement in place is not enough. It's better than nothing, but better yet, actually transfer your assets (or funnel them by way of updated beneficiary designations) to your trust. And don't forget that you need to update your will and trust from time to time. A lot of things change (your health, your family situation, your assets, the law, the list of people that you like and trust and would want to have making decisions on your behalf), and your estate plan needs to change in order to take those things into account. We recommend reviewing your estate plan at least annually, but making changes in the meantime as they become necessary.
- Failing to take steps to avoid family strife. Making your intentions clear is the first step. You can also build incentives (and disincentives) into your estate plan that can head off courtroom battles.
- Using a "do it yourself" computer program to design your estate plan. If you truly know what you are doing, these kinds of tools may work. If not, they are a crapshoot. Gamble with your family's future if you like, but you will probably save your loved ones a good deal of time and money by not taking shortcuts.
- Putting your kids on title to your stuff during your lifetime. Not only might you be setting them up for capital gains taxes, you may be be putting your assets at risk. Once you give something away, it is gone. Not even your kids' good intentions will spare you from the wrath of their creditors or ex-spouses.
Estate planning is serious business, and you are better off doing it right. Usually, that will mean working with professionals who will charge for their services. Shop around until you find advisors who know what they are doing, will help you devise a workable plan, and are worth their fees.