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Common estate planning errors that should be avoided

Nevada residents who are making plans for the distribution of their estates should keep in mind that the process might have a number of pitfalls. Errors made while making an estate plan can result in the wrong people receiving assets or in assets being tied up in litigation for years.

One of the issues that can occur is a testator choosing the wrong people to manage his or her estate. This goes for both the power of attorney appointed to make financial and medical decisions while an individual is still alive as well as the executors or administrators of the estate.

Beneficiaries may present another potential problem. One frequent mistake that people make is failing to change beneficiaries as their circumstances change. For example, an individual may divorce and never update an insurance policy that has a former spouse listed as a beneficiary. Sometimes, such errors can be challenged in court, but even when the challenges are successful, they may be costly and time consuming.

Appointing alternate beneficiaries is important as well. These alternates will be needed if the main beneficiary dies before inheriting or is otherwise unable or unwilling to accept the inheritance. If the main beneficiary cannot claim the inheritance and no one else is named, it could cause arguments amongst family members in addition to potentially locking the asset into the residuary estate. This may create tax problems if the asset is a retirement account.

A will and other parts of an estate plan should not be distributed, but a testator letting others know of the general plan for the estate can be beneficial; there will be fewer surprises and less chance that the will or other documents can be challenged since others can testify as to the testator's intentions. An attorney could help with estate planning in such a way as to these and other mistakes.

Source: Investing Daily, "Key Estate Planning Mistakes You Need to Avoid", Bob Carlson, July 24, 2014

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