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Estate planning is more than listing how to distribute assets

When you are creating estate planning documents, you likely want to make sure you have all the bases covered. There are some common mistakes that can botch an otherwise solid estate plan. New Jersey residents should be aware of these mistakes so they can avoid making them when they are preparing their estate planning documents.

One of the common mistakes that might be made is failing to fund a living trust. The living trust allows you to leave your heirs assets without them having to go through probate. When you do this, you have to retitle the assets in the trust's name. That means you have to change deeds for real property. You also have to retitle bank accounts and stocks.

A second common mistake involves your individual retirement accounts. When you are making your estate plan, you should know that IRAs that have your estate listed as the beneficiary are subject to creditor claims and other claims when the estate goes through probate. This means that the money in the accounts could be used to satisfy debts. Listing the estate as the beneficiary also means that the IRA won't grow.

A third mistake deals with leaving your estate plan unfinished. An estate plan is a two-fold plan. One part of the plan involves leaving your assets to the people you want them to be left to. The other part involves making plans for your end-of-life care. This means that you need to have a will, a living will, a durable power of attorney and a medical power of attorney. The will states how to distribute assets. The living will makes your wishes known for end-of-life care. A durable power of attorney appoints someone to care for your finances when you can't. A medical power of attorney appoints someone to make medical decisions for you if you are unable to make those decisions on your own.

Lastly, failing to create an estate plan before it is too late and neglecting to keep those documents updated are the final mistakes people make. Some people think they have plenty of time to make an estate plan and some think they don't need update the documents. Incomplete documents and out-of-date documents won't do your heirs any good if you pass away. The sooner you get started making or updating your estate plan, the better chance you have of completing it.

Source: The Fiscal Times, "5 Estate Planning Mistakes To Avoid" Shelly K. Schwartz, Apr. 15, 2014

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