Planning your estate is hard work, but paying attention to a few essential tips can improve the legacy of your estate significantly. Avoid these 10 common mistakes when planning your estate.
1. Procrastinating. Meet with an estate planning attorney sooner rather than later to help you at least draw up a basic estate. This will save you stress and ensure your estate is in the best possible condition.
2. Not Updating Your Will
With many changes happening within a family or business structure such as births, deaths, divorces, and new property acquisitions, it’s is wise to perform a periodic update of your will to ensure that assets go to who you intended.
3. Not Planning for Disability
An unexpected or long term disability can have significant consequences on your personal and financial affairs. Decisions such as who will handle your finances, raise your children, or make your healthcare decisions are extremely important. Appoint a power of attorney and/or create a living trust to work on your behalf.
4. Not Reducing Taxes Through Gifts
Did you know you could be adding money to your estate every year? Start saving money on estate taxes and start giving gifts away now. According to the Internal Revenue Service, gifts up to $15,000 a year per spouse may be excluded from estate tax. So give gifts to individuals, groups, or businesses and positively impact others while avoiding heavy taxation on your estate. Under current law this issue is significant only for very substantial estates. However the law could change in the future.
5. Putting Your Child’s Name on the Deed
It might seem like a smart move to avoid probate, but one needs to be careful in how this is done. As a general role a revocable trust is a better way to avoid probate, but if you want to add a child’s name to the deed you should consider the use of a Lady Bird deed (or enhanced life estate deed) rather than a standard joint ownership form. . This can also be important for future income tax planning for the child
6. Choosing the Wrong Person to Handle Your Estate
The best executor of your estate isn’t always the first person who comes to mind. For example, sometimes the people closest to you are too emotionally invested to objectively handle the duties and demands required of an executor, trustee, or guardian.
7. Not Transferring Your Life Insurance Policies to a Life Insurance Trust
A life insurance policy is subject to a hefty estate tax when you die, resulting in most of the proceeds going to the IRS instead of your intended beneficiaries. But you can avoid this by setting up a life insurance trust to act as the owner of your life insurance policies. This solution not only avoids insurance proceeds being heavily taxed, but it also spares your beneficiary the waiting period before insurance proceeds pay-out.
8. Not Taking Advantage of the Federal Exemption
According to FindLaw, one of the easiest ways for married couples to save on estate taxes is to fully use the federal exemption for each spouse (set at $11.18 million per spouse in 2018).
10. Not Meeting with an Experienced Legal Professional
Not meeting with an estate planning attorney is one of the most common mistakes, especially if you have complicated assets or doubts about your own ability to draft an estate plan. An experienced attorney can provide you with tax-planning strategies based on the particular needs and demands of your estate.
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