6 Mistakes to Avoid When Making Your Estate Plan

Everyone should have an estate plan, but statistics show that less than one-third of Americans even have a will. Some people mistakenly believe estate plans are only necessary for high-wealth individuals — not necessarily true — but for many others, it’s just a matter of never getting around to setting one up. If you’re ready to start thinking about the future and what legacy you want to leave behind, remember these common pitfalls to ensure you have the right estate plan for your needs.

1. Failing to Keep Your Estate Plan Current

Many people make the mistake of creating an estate plan or drawing up a will, only to never look at it again. However, estate planning is not a one-and-done process. Your estate plan requires regular review and updates to ensure it reflects your most current wishes and any changes to your life circumstances. For example, you may need to update beneficiaries to life insurance policies and other assets after a divorce or the birth of a child. Reviewing your estate plan and communicating any necessary changes to your attorney once a year or any time you have a significant change in circumstances is a good idea.

2. Only Planning for Finances

Another common mistake many people make when creating their estate plans is only addressing the financial aspect. An estate plan is a comprehensive set of documents that can ensure your wishes are known after you pass and while you’re still living if you are incapacitated in any way. Documents that almost everyone can benefit from and should include in their estate plan include a health care power of attorney and an advance health care directive.

A health care power of attorney is a legal document permitting another person to make decisions regarding your medical care. It only goes into effect if you cannot make those decisions yourself. Examples of potential scenarios where a health care power of attorney may need to step in include:

  • If you are unconscious in surgery
  • If you are in a coma
  • If you have Alzheimer’s, dementia, or another memory-related condition that renders you unable to make good decisions for yourself

An advance health care directive is slightly different. Instead of appointing another person to make decisions on your behalf, it outlines your wishes for your medical team. This can include everything from whether you want to be an organ donor to what kind of life-saving measures you want to be taken, if any. 

These two documents can work together to ensure that your loved ones know your wishes and that someone can make decisions quickly if the need arises.

3. Leaving Assets to Minor Children

Many parents choose to make their estate plans as simple as possible by directing their assets to be divided equally between their children. However, if your child is still under 18, this can lead to some unintended consequences. If you don’t name a financial custodian or put the assets in a trust, the court may appoint someone to handle the funds until the child reaches adulthood. While this person has a fiduciary duty to act in the child’s best interest, they may be a stranger unfamiliar with your family or your wishes. 

When planning for your children’s futures, the best course of action is to talk with an estate planning attorney about your options and be proactive in setting up your estate plan. This should also include appointing someone to serve as guardian for your children if both parents pass and are unable to do so.

4. Thinking a Will Is Enough

A last will and testament is required to avoid your estate being subject to Iowa’s intestacy laws. However, this isn’t enough to fully protect your legacy and ensure that your assets are distributed according to your wishes. Other estate planning tools, such as trusts and transfer-on-death accounts, can help you avoid probate, ensure your beneficiaries get their inheritances as soon as possible, and provide more customization when it comes to your estate plan. 

At Scott Shoemaker & Associates, our team has extensive experience helping those in Iowa create custom, comprehensive estate plans. We know what questions to ask to determine which tools are right for your plan and can ensure you are informed on all of the options.

5. Forgetting to Plan for Medicaid

An often-overlooked benefit of proper estate planning is that it can help you protect your assets while still maximizing your Medicaid qualifications. Medicaid has specific guidelines on how much income and assets a person can have and still be eligible for, and there are lookback periods, which means that any adjustments to your assets need to be made far enough in advance not to be used against you. Working with an estate planning attorney well before you think you’ll actually need Medicaid can ensure you have plenty of time to create and implement a plan.

6. Not Working With an Experienced Estate Planning Attorney

In Iowa, anyone who is at least 18 years old and of sound mind can create a will as long as they have it witnessed by at least two people. However, your estate plan shouldn’t be a DIY process. Estates and assets can be complicated, and you need an attorney who has the experience to help you determine what tools are right for your situation and what steps to take to preserve as much of your estate for your beneficiaries as possible. 

The team at Scott Shoemaker & Associates is here to answer all of your estate planning questions. Call 319-379-2007 to schedule an appointment.