Having an estate plan in place is a must, no matter how old you are or how many assets you have. However, just having a plan in place is not enough to protect you and your family. It is equally important that you choose the right tools and use them in the correct manner to ensure you are protected. U.S. News & World Report explains how you can avoid common estate planning mistakes.
Trusts are a great estate planning tool. They help you avoid probate while also giving you more power over how your assets are dispersed, provided that they are funded correctly. Funding a trust means taking your assets and changing them so that they are owned by the trust. Different assets are transferred in different ways; for instance, you may need to change deeds and titles or you might have to change beneficiary designations on life insurance policies. Only when a trust has been properly funded does it protect your assets.
It is also recommended that you make changes to your entire estate plan as needed. Major life events, such as marriage or the birth of a new child obviously calls for a review of your will so that you can make the proper changes. Even if no major life events occur, it is a good idea to review your will every three years or so to make sure it still meets your needs.
Finally, when handing out inheritances, it is best to structure them in such a way so that heirs do not receive money in one lump sum. This increases the chance that your heirs will use the money frivolously, which could have a negative impact on their life. You can structure a trust to only provide funds according to a certain schedule or to disperse funds in smaller increments during a person’s life.