The rules that accompany estate planning practices keep changing and could eventually affect the transfer of assets to your loved ones.
Here are three common areas where mistakes could cost your beneficiaries relative to the assets they stand to inherit from you.
Forgetting to make beneficiary designations
It can be easy to overlook naming your beneficiaries when you first establish a retirement account or when you change from one investment company to another. Accounts with properly named beneficiaries will not have to go through probate. They will pass directly to the beneficiaries themselves.
Naming a minor
Naming a minor child or grandchild as the beneficiary on a particular account could bring the court into play. If you leave an asset to someone who is still a minor when you die, the court will establish a guardianship to manage the asset until he or she reaches majority. You can get around this by naming a guardian in your will. Alternatively, you could establish a trust for the minor child and name a relative or friend as the trustee to manage it.
Funding a trust
A common estate planning mistake is failing to fund a trust. Funding may include changing your bank and investment accounts from individual ownership to trust ownership or to designate your trust as the beneficiary on your retirement accounts and life insurance policy. Remember that any asset that is not included in your trust may have to go through probate.
Ensuring that your heirs encounter the fewest legal issues and tax problems when you are no longer here is simply a matter of advance preparation. Take steps now to avoid mistakes and save financial and emotional stress for your loved ones.