Estate Planning Essentials: Top Tips to Get You Started

Most people shy away from contemplating their own mortality and the administrative aftermath of their demise. However, if you’ve ever had to sort through a relative’s chaotic financial affairs after their death, you understand the immense burden it can place on the bereaved. By crafting a comprehensive estate plan, you can prevent such stress for your loved ones.

This guide will walk you through the essentials of estate planning and highlight some typical blunders to avoid.

Understanding Estate Planning

Estate planning involves arranging in advance how your assets should be managed and distributed after your death. It usually begins with establishing a will or a living trust.

A will specifies your wishes regarding the distribution of your assets posthumously. Nevertheless, your estate may still need to go through probate, a court process in your state that confirms the validity of the will and authorizes someone to execute it. Essentially, while a will outlines your preferences, it doesn’t circumvent the probate process.

Many experts advocate for a revocable living trust over a will for this reason. According to Evan H. Farr, a Certified Elder Law Attorney and Principal at Farr Law Firm, a living trust is a superior tool because it avoids probate. “Many people think they need wills, but a will essentially guarantees probate. Once you realize how problematic probate is, you’ll always want to sidestep it,” Farr explains. “Trusts simplify everything after death and are crucial in avoiding probate.”

Steps to Creating an Estate Plan

Financial advisors often recommend that individuals start estate planning as soon as they reach legal adulthood. If you haven’t yet begun, consider this a nudge to get started.

If your estate or family situation is complex, it might be wise to engage an estate planning attorney to assist in drafting or reviewing your estate plan.

Common Pitfalls in Estate Planning

Here are some frequent errors people make in the process of estate planning:

1. Failing to Update the Estate Plan

An estate plan needs regular revisions to reflect life changes such as births, deaths, marriages, divorces, or new business ventures. Jennifer L. Zegel, an Estate Planning Attorney and Chief Product Officer at Eternal Me, emphasizes that out-of-date plans can lead to numerous problems. “If new assets are not accounted for in the will, it could lead to disputes and prolong the distribution process unnecessarily,” she notes.

2. Excessive Dependence on DIY Solutions

With the rise of estate planning software and AI tools, many individuals opt to create their estate plans independently. However, this approach has its risks. Zegel warns, “Believing that an AI can produce a flawless estate plan without professional oversight is misleading and dangerous. I’ve witnessed cases where clients’ digital instructions conflicted with those in their living wills because an attorney hadn’t reviewed them.”

Ben Michael, an attorney at Michael & Associates, also stresses the importance of personalized advice, “Estate planning is inherently personal and no two situations are the same; that’s where direct consultation with an attorney becomes invaluable.”

3. Overlooking Digital Assets

Many people forget to include digital assets like cryptocurrencies, online accounts, and intellectual property in their estate plans. Zegel points out, “Ignoring digital assets is a costly oversight that can lead to complications for executors and heirs.” She advises taking special care to plan for these assets properly, including secure storage of access information and consulting an attorney to ensure these assets are handled according to your wishes.

Provide Peace of Mind to Your Loved Ones

A well-crafted estate plan offers clear instructions and peace of mind to your family, allowing them to focus on healing rather than administrative hassles. If you haven’t set up your estate plan, doing so can spare your loved ones from unnecessary disputes and guesswork regarding your final wishes.