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Common mistakes with estate planning and risk management
BY TOM KACIREK AND STEPHEN P. RICKLES, J.D.

Most dentists don’t get too far into their careers before they start to consider the importance of an estate plan and a financial risk management plan for their families and heirs. If you have already created a plan or are thinking of starting one, you'll want to look out for mistakes that can lead to problems down the road. Here are some common mistakes that you’ll want to avoid when it comes to estate planning and risk management.

NO ESTATE PLAN WHATSOEVER

One of the biggest mistakes you can make is failing to do any planning at all. Owing to changes in the estate tax laws, many people believe that there’s no need for estate planning if their estate is smaller than the estate-tax exclusion amount ($5.45 million in 2016). The exemption has sharply reduced the number of estates subject to federal estate tax. However, estate planning provides many benefits beyond reducing or eliminating estate taxes.

You should consider how the following might affect your estate plan:

  • The ages of your heirs.
  • Their level of financial responsibility.
  • The amount they will inherit.
  • Any special needs one or more of them may have.
  • Avoidance of probate.
  • Potentially being incapacitated.
  • Divorce concerns.
  • Other concerns.

It is also important to have a frank discussion about issues related to second marriages, blended families and the possibility of the surviving spouse remarrying after the death of the other spouse.

PROPERLY MANAGING YOUR RISKS

Another common mistake is not thinking through the possibility of being incapacitated or disabled during your lifetime. This makes the estate planning process an important time to review your insurance coverage. Younger dentists, in particular, are statistically much more likely to become disabled than to die prematurely, yet they often neglect to adequately address this possibility.

You should also make sure that your life insurance coverage is adequate. Remember, life insurance has many purposes and can provide funds for things such as:

  • Financing a child’s education.
  • Paying off a home mortgage.
  • Carrying out a buy-sell agreement.
  • And more.

NOT KEEPING YOUR PLAN UP TO DATE

This mistake can take on a few forms:

  • Your estate plan, which should be part of a comprehensive financial plan, was last updated many years ago. Your estate plan and insurance benefits should be reviewed every few years and updated if necessary to reflect your changing goals and significant life events, such as births, deaths, inheritances and divorce.
  • Life insurance and retirement plan beneficiary designation forms aren’t updated.

Retirement plans and insurance benefits are not distributed based on your will (unless there is no beneficiary designation and the proceeds end up in your estate).

They are distributed based on the beneficiary forms on file with the financial institution. Thus, beneficiary designations should be viewed as an integral part of any estate plan review. Many times this task is neglected and a deceased person, or even a former spouse, is listed as the beneficiary. It is better to be proactive when handling such delicate matters to avoid retirement plan proceeds and insurance benefits passing to unintended beneficiaries. (You should also check with your banking institution to make sure you have made beneficiary designations for your checking and savings accounts.)

So, avoid these mistakes, but especially don’t avoid this potentially critical part of your financial future.

The cost of estate planning is relatively modest compared with the financial and emotional toll you could face when there’s no plan in place. The cost of an estate plan can range from $1,000 or less to many thousands of dollars, depending on the size and complexity of the estate. In any event, the risks of not having a current estate plan far outweigh the expense of putting one in place.

Great-West Financial®, issuer of the ADA Members Insurance Plans, is committed to helping you make informed financial decisions. This series on estate planning includes:

Why You Need an Estate Plan
Common Mistakes with Estate Planning and Risk Management
Keeping Your Estate Plan Up to Date
Do You Have All Your Estate Planning Needs Covered?

Mr. Kacirek, FSA (fellow of the Society of Actuaries), MAAA (member of the American Academy of Actuaries) is vice president, Specialty Insurance Markets for Great-West Financial, which issues the ADA Members Insurance Plans including life insurance, disability income protection, office overhead expense and supplemental medical. For more information on these plans exclusively for ADA members, visit insurance.ada.org.

Mr. Rickles, an estate planning attorney with Spencer Fane LLP, specializes in the preparation of wills and trusts as well as financial and health care powers of attorney, living wills and related documents. He is a member of the Real Property, Probate and Trust Law Section of the American Bar Association and a member of the Tax and Trusts and Estates Sections of the Colorado Bar Association and the Rocky Mountain Estate Planning Council. For more information, email srickles@spencerfane.com.

Mr. Rickles and Spencer Fane, LLP are not affiliated with Great-West Life & Annuity Insurance Company, Great-West Life & Annuity Insurance Company of New York or their subsidiaries and affiliates.

Rickles SP. Common mistakes with estate planning and risk management. Posted online January 23, 2017 at https://success.ada.org/en/practice-management/dentalpractice-success/winter-2017/common-mistakes-with-estate-planning-and-risk-management. Copyright ©2017 American Dental Association. All rights reserved. Reproduced with permission.

AM686626-1218

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Why you need an estate plan
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Keeping your estate plan up to date
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Do you have all your estate planning needs covered?

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