Avoiding the Common Pitfalls of Creating a Will and Trust
One of the most important items on the financial to do list for new parents is an estate plan, which typically includes a will and a trust. A will can designate the person who will oversee the process of concluding your affairs, based on your directions. It also can express your intent when it comes to your burial, guardianship of your children and other things that are important to you. A living trust is an agreement that names the person or people who will manage and enjoy the benefit of your property, both before and after your death.
While the process of creating an estate plan that includes a will and trust sounds like a straightforward process, there are many complexities that make it not so cut and dried. There is plenty of room for error. Here are the top five common pitfalls to avoid when designing a will and trust:
1. Thinking a “Do-It-Yourself” solution is the be-all end-all. There are a number of software solutions that might be just what you need to create a basic will and trust such as Suze Orman’s Will & Trust Kit. While these might be able to walk you through the process of designing a will and trust that is right for you, there are a few reasons to consider enlisting the help of an estate planning professional, especially if your situation is complicated by divorce, children from previous marriage, or if you assets are significantly above $1 million. These reasons include the risk that you could overlook something or neglect to think about a crucial aspect of your estate. In addition, it is important to remember that laws can change. When they do, your will and trust can be affected. So, getting help from an estate planning professional at some point, along the way, is a good idea — just to make sure your plan is adequate enough to meet your needs and up to snuff with all the latest regulations. At the end of the day, having a basic will and trust set up is better than having none at all.
2. Selecting a guardian for your child without careful thought. There are a number of factors to consider when selecting a guardian for your child, if the unexpected were to happen. Is Uncle Bill or Aunt Kathy really the best person for the job? And, while it might not be easy, having a heart-to-heart chat with whomever you would like to play the role of your child’s guardian is key. You want to make sure they are willing and feel confident to handle the day-to-day raising of your child until he or she reaches the age of 18. Remember, if you procrastinate now, the result could be court intervention if the unfortunate were to occur.
3. Forgetting to update your will and trust. If you think that estate planning or creating a will and trust is a one-time project, you’re likely to miss covering all your bases. As your circumstances change, your will and trust should be adjusted. A change in the law could also affect previous decisions that you’ve made and outlined in your estate plan. As your family evolves, you’ll also want to revisit your will and trust to make sure they both still makes sense, given your current situation.
4. Leaving out the details when designating titles and beneficiaries. Figuring out all the details of your estate plan can be a tricky proposition. Who will act as the executor? Under which conditions will specific beneficiaries be named? A thorough estate plan can help make sure all your instructions are packaged correctly and, when you are no longer around to have a say, carried out in the way that you wish.
5. Believing a will and a trust or estate plan is unnecessary. Whether you’re the next Warren Buffet or not, there is no financial threshold that is required before the creation of an estate plan becomes necessary. It is true that the more assets you own, the more complex of an estate plan you’ll need. Certainly if you own your own home or any other real property, a will and trust is vital. Just the fact that you are a parent, however, makes creating a well thought-out estate plan an absolute must.
By dodging these mistakes, you’ll be able to create a will and trust that brings you peace-of-mind. They are things you should not live without, especially as you begin to build your family. Once they are in place, you’ll be able to rest assured — knowing that your children will be taken care of, no matter what.
