By Liz Knueven
Aug. 30, 2021
Estate planning isn't an easy thing to do at any stage in life, and something many of us choose to ignore. When planning for retirement, however, it's crucial.
- Retirees often forget to designate beneficiaries on accounts, or make an estate plan at all.
- People don't think to read their plan, adjust it often, and fully understand it.
- And, they forget to talk with their families about their estate plans before it's too late.
Certified trust and financial advisor Jala Eaton has worked with many individuals and families to write their wills and plan for the future, and says some of the most common estate-planning mistakes she sees are easily avoidable. Here are the top five things she sees retirees do wrong when it comes to estate planning.
1. They forget to designate beneficiaries on their accounts
"As a retiree, you definitely want to make sure that you have your beneficiary designation updated. That's before you even get into your actual estate-planning documents," Eaton says.
Adding beneficiaries to your accounts — or choosing who will receive your account when you die — is a critical part of estate planning, and it's one step almost anyone can do themselves with a half an hour.
In most instances, you can designate a person or entity as the beneficiary online. You can start the process by logging into your accounts online, or contacting your bank or institution.
2. They forget to make an estate plan altogether
Many people haven't thought about estate planning at all, and that's a major issue.
"The most common issue I see people have with their estate plan is, No. 1, they don't have a plan," Eaton says.
While making one can be difficult, it is necessary. Without it, your family could end up having to go through the court system to get ownership of assets left behind, or your wishes may not be carried out as you hoped.
An estate plan can make sure money and assets go to the right places and people, and that everything is as you would want. "This controls everything that you've worked for," she says.
3. They forget to fully read and understand every part of their plan
Eaton says there's often a disconnect between what an estate plan means and what a person thinks it means.
"When I do audits, I make sure to ask the person before I even read their document, 'What do you think this plan does? What was your intention of your estate plan? How do you want it to work?' Almost 95% of the time, it does not work the way that they think that it should," Eaton says. "Either they didn't understand, or their attorney didn't understand."
That's a mistake that should be caught sooner rather than later.
Reading your plan thoroughly and understanding each part of it is critical, Eaton says. Ask any questions you may have and clarify the details. That's the best way to be sure your plan will follow your wishes.
4. They forget to update their estate plan periodically
Even after you've retired, life changes. Your estate plan should change, too.
"Usually for my clients, I say to read your plan every year," she says. While milestone events like the birth of a grandchild or moving homes can be a big change, they could also signal that it's a good time to change your estate plan, Eaton tells Insider.
Additionally, laws are constantly changing, and it could mean your plan should change, too. "Every year, it seems like, we're having tax law changes, and that truly effects estate planning," she says.
Making sure that your estate plan is as tax efficient as possible will make receiving an inheritance much less costly for your family and ensure more of your money goes where you'd like it to.
5. They forget to talk with loved ones about their plan
Another major mistake Eaton sees is individuals not sharing their plans with those close to them.
"It's critical that you talk about this with your loved ones, because, yeah, it's wonderful you've got your estate plan done. But if they have to become a private eye and a private investigator after you're gone, that eliminates why you are doing your estate planning in the first place," she says.
Your family should know where important documents are kept, and who was involved in making them. Having this conversation isn't always easy, but it is a discussion that will all help you to get on the same page and save a lot of additional heartache later.
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