Making plans for the future is a very serious matter. The kind of decisions you make now will have a ripple effect throughout your lifetime and down to your family. But when it comes to estate planning, many people end up making costly mistakes that are disastrous to their surviving loved ones. Some have wrong beliefs, some are ignorant, while others make mistakes because of carelessness. However you look at it, making the wrong choices will cause so much trouble for your family when you pass away, and they may not be too happy with you for causing them so much trouble.
Common mistakes people often make when estate planning
1. Not writing a will because your assets are few
Some people fail to write a will because they feel they don’t have so much to leave behind. But estate planning is not only for the high net worth individuals. If you have money in the bank, a small scale business, or a car, then you need to say who receives each of these things. If not, your family will end up fighting over them when you die. You don’t want your family getting brutal with each other when you’re gone. Then you have to write a will so they know your wish, and then they would have no option but to abide by it.
2. Not updating your estate plan
A lot of people keep their estate planning documents immediately after creating them. Then they forget all about the documents until death. But what happens when one of your named beneficiaries dies before you? What if you get divorced or remarry and get new kids? What about those new assets you acquire? What happens when you die without addressing them? Your wishes will not be known, and your new children may not get what you’d have wanted for them, whereas your divorced spouse still benefits a huge part of your estate. It is important to review your estate plan periodically and effect changes when and where necessary.
3. Not planning for tax
People write wills without giving a thought to tax imposition. If you do not plan with an eye towards tax, you may be leaving a heavy tax burden upon your loved ones. New York imposes an estate tax on estates valuing over $5.85 million. There is also a federal estate tax for estates exceeding $11.58 million. Put together, your beneficiaries would have to give up a considerable part of the estate to the government.
But you can avoid these taxes by adopting some estate planning strategies.
4. Not planning for your minors
While your adult children can inherit, your kids below 18 cannot. So if you’re leaving assets for that 15 year old son, he cannot receive it until three years later. To ensure your minors enjoy the kind of treatment you want for them, you have to name a guardian for them. This guardian will use the assets you live for the child for the child’s benefit until they come of age to handle it themselves. If you fail to make such plans, the court may choose a guardian for you, and it may not be the person you wish.
5. Not considering incapacity
Incapacity planning is another integral aspect of estate planning but so many people ignore this. As sad as it is to think about, anyone can become incapacitated at any time, especially during old age. If you do not chose who would become responsible for managing your estate now that you’re competent, chances are that when the time comes, the wrong person will stand to manage it. Or else, there would be conflicting opinions within your family. Now, you could create powers of attorney to appoint an agent to make financial and/or Healthcare decisions for you when you become unable to make them yourself. An estate planning attorney can help prepare all these documents.
6. Not consulting with an estate planning attorney
You are most liable to make mistakes when you depend on your own inexperience. Estate planning is legal and requires legal hands for efficient execution. Having an experienced estate planning attorney working with you gives you rest of mind that you’re in good hands.
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