When you’re young, you feel invincible. You take risks, eat whatever you want, and have your entire future ahead of you. The world is your oyster and you are the pearl.
As you head into adulthood and start taking inventory of your life, you may notice that it’s not just you that has to depend on you anymore. Spouses, children and a new nuclear family mean taking better care of yourself and planning for the future. Even the unpredictable parts.
To insulate you and your family from unnecessary stress in the face of unexpected tragedy, it’s important to get a few key things in writing.
This goes double for women who may not know where to begin or which parts of estate planning are the most important.
If you want to mitigate headaches down the line be sure to avoid the following five mistakes when it comes to planning for your estate:
Mistake #1: Not having a guardianship designation for minor children.
- Regardless of your marital status, if you have children you should definitely have a guardianship designation for anyone under the age of 18. These guardianship designations will prevent unnecessary court proceedings in the event of one or both parent’s death and can be made in your will or in a separate document.
Tip: These guardianship provisions should be reviewed and updated as needed based upon changes in circumstances such as the age of the children or the age or condition of the selected guardian. For example, young mothers often designate their parents to be the guardian for minor children, but as parents age, they may not be as mentally or physically equipped to care for minor children.
Mistake #2: No financial power of attorney.
- While it may seem logical to believe that you can act for your spouse as a legal agent this is often not the case. Should your husband become incapacitated, you need to have a financial durable power of attorney before you can act on his behalf in financial matters; for example, in signing a deed to sell a house to down-size or lawsuits brought against a company associated with a negligent accident. This is particularly important in community property states where property is often held in the name of both spouses.
Tip: If you are single, having a durable power of attorney is equally important so that someone can manage your personal affairs without having to go to court to be appointed their legal guardian.
Mistake #3: Having an outdated medical power of attorney.
- A medical power of attorney allows an appointed agent to make healthcare decisions for you if you are ever unable to do so. This is important for both single and married persons. For example, say you and your partner were, heaven forbid, in a common accident. Your spouse may not be able to make health care decisions for either of you. It’s always important to have your wishes known when it comes to your health. Designate someone you trust who will honor those.
Mistake #4: Not properly designating beneficiaries on retirement plans (IRS, 401K) or insurance policies.
- No one wants to file for a costly and slow-going probate if your benefits or proceeds end up payable to the estate. To ensure your assets get paid out timely and hassle-free, be sure to keep designations up to date, especially in situations such as divorce or the death of a previously named beneficiary. For example, a divorce may result in the ex-spouse still being named as a beneficiary, which may cause the proceeds to default and pay out to the estate if a contingent beneficiary is not named.
Tip: Naming children as the primary or contingent beneficiary of a retirement plan or insurance policy may seem the natural choice. However, naming minor children as beneficiaries may result in them not receiving the benefits until they are of legal age or it may create the need for a guardianship proceeding with its related cost and time.
Mistake #5: Insufficient life insurance on yourself or your spouse.
- Failure to have adequate life insurance can be devastating if there is an unexpected death. Life insurance can provide for payment of debts, college educations, and provide money to pay living expenses. The need for life insurance is important for young families since they have not had the time to accumulate a lot of savings. It is also important for older families when expenses may be heavier to pay for college. Having adequate life insurance helps protect against the dissipation of other savings and accumulated wealth.
Accidents happen, and though unfortunate, with just a bit of effort you can at least rest assured you and your family will be taken care of should anything unexpected befall you.