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Top five estate planning mistakes people make

Estate planning done correctly serves as an essential part of your overall financial plan. With that in mind, here are five mistakes people often make that relate to estate planning:

Mistake #1: Not having a plan

Of course, the most serious estate planning error is simply not having a plan at all. Drafting a will and other important estate planning documents may not be the most pleasant type of task to tackle, but it is necessary not just for the wealthy but for everyone.

Do you know who will take care of your children if you pass away? Who should get what share of your money? Are you interested in trusts that can help you manage your money and avoid certain taxes? Who should make healthcare and financial decisions for you if you become incapacitated? It is important to ask these questions now, when you are capable of making the decisions for yourself and your family.

Mistake #2: Setting it and forgetting it

If you do have an estate plan in place, you have taken an important step to protect your finances and your family. However, an estate plan needs to be revisited periodically. It is a mistake to think that you can set up a plan and leave that in place indefinitely.

Circumstances change, whether it is the birth of a child, divorce, prolonged illness or anything else that could potentially alter your estate plan. Review your plan at certain intervals, such as once per year, or whenever your life circumstances change, to ensure it continues to reflect your wishes.

Mistake #3: The wrong trustee

Choosing whom to be the trustee or executor of your estate is a weighty issue. It is wise to give this a great deal of thought, and it is a mistake to designate the wrong person for this role, particularly if they do not have your best interests at heart. Many people select an impartial third party as the trustee so someone who can be objective about the issues at hand can fulfill their complex and involved obligations.

Mistake #4: Going it alone

You can handle certain tasks and projects on your own. Estate planning is not one of them. It is a mistake to try to handle this without consulting a professional. There are plenty of services that offer "free estate planning kits" and "do-it-yourself wills," but please remember that estate planning is both complex and important. There are a number of options available to you, and which options you choose depends on your unique situation. This is not time for a cookie-cutter approach.

You need an estate planning attorney and quite possibly a tax professional and financial consultant to help you navigate through the various documents and options available to you. It will give you peace of mind and a better estate plan when you consult these professionals and ask them questions that are relevant to your circumstances.

Mistake #5: Putting it off

Once you know you need to create an estate plan and that you need to work with a qualified professional to put it to together, it is wise to get started on it as soon as possible.

When you steer clear of these mistakes and instead follow a thoughtfully created strategy, you'll have an estate plan that makes up a crucial component of your financial plan. So be savvy, do not make these mistakes, and you and your beneficiaries will have greater peace of mind both now and down the road.

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