Common Estate Planning Mistakes
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What are the Most Common Estate Planning Mistakes People Make?
Estate planning is plays an essential role for the future of yourself and your loved ones. While it is important to have a good estate plan in place, it’s also very important to make sure that it’s done correctly. Mistakes in your estate plan can be costly in the long run, and can even lead to legal problems in some cases.
Being aware of these mistakes can help you take the proper steps to avoid them, so here’s a list of some of the most common estate planning mistakes:
Not having an Estate Plan in place
Though this may seem basic, a lot of people don’t create an estate plan, usually because they think it’s not important. However, it IS very important to create a solid estate plan, which should cover the entirety of all your belongings and assets. That way, your estate will be handled the way you really want it to, and in a way that follows the laws in your area. An estate plan is beneficial even if you have a relatively small estate.
Failing to update your will
Your will is the main document for your estate plan. It should cover precisely which persons will receive each specific item or funds upon your death. Your wishes regarding the distribution of your assets are likely to change several times throughout your lifetime. Thus, you need to have a valid, updated will ready- if you note any changes, you should update your will as soon as you can.
Not accounting for disability
Estate planning involves preparing for the future, whether it involves death or disability. Oftentimes, a seriously debilitating condition can leave a person incapacitated and unable to act on their estate. Thus, your estate plan should include instructions for what to do in the event you become incapacitated. You will want to appoint an agent or a power of attorney to handle decision-making on your behalf if necessary.
Not understanding tax consequences
Another common estate planning mistake is not understanding all the different tax consequences involved in the process. This is to be expected, since the average person isn’t an expert on taxes.
For example, placing your child’s name on the deed to your home might seem like a safe and generous thing to do. However, in the future it may leave your child with a very large gift according to law, which will result in hefty taxes that your child will have to pay. A better alternative would be to have the title pass to your child through inheritance laws rather than gift laws. It’s the subtle distinctions like these that make it necessary to work with a lawyer during estate planning.
Choosing the wrong executor
The executor is the person you appoint to handle your estate matters upon your death or in the event of disability. You will want to choose carefully when selecting an executor; they should be someone you can trust, and who is familiar with your estate.
Most importantly, your executor should have good knowledge of your intentions when it comes to your estate. There are state laws covering who you can and can’t appoint as your estate executor. Picking the wrong person will make it more difficult to execute your estate plan under local and state laws.
Not working with a lawyer and other professionals
Estate planning is a major undertaking- you shouldn’t attempt to handle it all by yourself. You’re going to need the guidance of professionals, like a lawyer, accountant, and possibly others. While it may seem like a huge task, remember that in the long run you will save yourself and your loved ones much confusion by avoiding estate planning mistakes.
How Can a Lawyer Help me Avoid Common Estate Planning Mistakes?
A qualified estate planning lawyer will be able to help you draft and review the documents for your estate plan. They can provide valuable advice on matters such as property distribution, appointing an executor, and reducing tax consequences. Your lawyer can also represent you in court in the event that you encounter a dispute over your estate.
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Last Modified: 03-15-2012 11:54 AM PDT
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