If you have already started creating your estate plan, congratulations on taking an important first step that too many Americans continue to avoid. As you’ve likely experienced, the process can be overwhelming, with many documents and decisions serving a variety of purposes from a will and trust, to beneficiary designations, to a power of attorney appointment.
With so many moving parts, it can be easy to forget one or more important components of an estate plan and potentially impact the distribution of your assets, as well as your family and other loved ones, in a negative way.
[Read: What Happens to Money After You Die?]
Here are four common mistakes that investors make when developing an estate plan.
Not setting or updating a beneficiary for your financial accounts. When opening a bank, retirement or other financial account, you are typically asked to designate a beneficiary who will automatically receive ownership of the account upon your death. It is critical to name a beneficiary for each of your accounts to avoid an arduous probate process, which can be costly and time-consuming.
Equally as important is checking to make sure that the beneficiary you named on an account that you may have set up many years ago is still relevant. For example, you may wish to change the name from a parent or sibling to your spouse or child.
Furthermore, you should consider naming an contingent beneficiary in case the primary beneficiary passes away unexpectedly.
Neglecting to appoint a guardian for your children. If you have children under the age of 18, don’t forget to name who you would like to be the guardian of them if both you and your spouse die, whether it’s a relative or a close family friend.
If you don’t, the decision on where your children end up will be in the hands of the court system (this also applies to the assets you leave for their benefit). It is advisable to have these discussions with your spouse (and of course the designated guardian) early on in your child’s life to be prepared for the unexpected.
You may also want to designate a monetary gift or stipend in your will for the guardian to ensure everyone will still be financially secure.
[Read: Prepare Now to Help Your Heirs.]
Forgetting to update your will. It’s common knowledge that everyone should create a will to designate who assets will be distributed to once the inevitable occurs.
While these conversations with family members and other loved ones can be uncomfortable, it is helpful to educate them on your wishes, give them at least a general idea of what they should expect to receive, and provide information on where your financial accounts are located.
But the process doesn’t stop there. A will is not a “set it and forget it” type of document, in fact one should think of a will as a living document something that evolves and changes as time goes on.
Aim to review your will at least once per year to confirm it factors in your current health, relationships and financial situation. This will ensure that your wishes are addressed properly and, most importantly, help protect both your assets and your loved ones.
Appointing an ill-advised executor. The decision of who will be your executor may be the most important — and difficult — one in the process of creating your estate plan.
The executor of your estate will be charged with serious and time-intensive tasks such as distributing your personal items, working with all your financial and investment institutions, selling your house if you choose to do so, and paying all debts and taxes. Given this role, it is critical to carefully consider who you believe will be the most trustworthy, tenacious, and scrupulous person to effectively manage your estate.
Once you have selected an executor, it is helpful if you provide them with a list of duties, personal information like your Social Security number, and the location of all your financial accounts so the process is less burdensome.
[Read: 7 Estate Planning Mistakes You Can’t Afford to Make.]
Creating and maintaining an estate plan can be arduous and emotional, but it will be time well spent once your assets and loved ones are protected.
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Are You Making These 4 Investing Mistakes? originally appeared on usnews.com
