Most people in New Jersey execute an estate plan with the intention that it will meet their wishes and benefit their heirs. However, a poorly drafted estate plan or an outdated estate plan can lead to undesirable complications when it comes to enforcing your wishes.
The following are some common mistakes people make when estate planning.
First, some people do not draft a will or trust at all, because they assume their state's intestacy laws will pass their estate on to their desired heirs. However, while state intestacy laws dictate who is to inherit a person's estate if there is no will or trust, not having an estate plan means that the court will choose your heirs, and the court's decisions may not align with what you would have wanted. Moreover, going through the probate process when there is no will or trust is a time-consuming and costly process that can deplete estate assets and cause heirs much grief.
If a person has a trust, retirement accounts or a life insurance policy as part of their estate plan, these items will have a named beneficiary, who will receive these assets once the person passes away. However, it is important to update beneficiaries when life changes. For example, new children may be born that you might want to include as beneficiaries to an account. Or, a person might name a spouse as a beneficiary but later divorce. In this case, they will likely want to remove their ex as a beneficiary.
Speaking of trusts, it is important that a trust is funded with estate assets. If assets are left out of a trust at the time of a person's death, those assets will not go to directly to the trust beneficiaries, but instead would be probated. And, as mentioned above, intestacy laws may make it so that the person who ultimately inherits these assets may not be the person you would have chosen.
Estate planning generally is not one-and-done. An estate plan should be reviewed periodically to ensure it still meets your wishes. In addition, having an estate plan -- even a simple one -- is often better than having no estate plan at all. Parsippany residents who have not executed an estate plan or have not revisited an existing one for a while will want to ensure that they have the tools in their estate planning arsenal that meet their current needs and desires.