Top 5 Estate Planning Mistakes
When done well, estate planning can save the loved ones you leave behind a great deal of money in taxes and fees. When done wrong, as we’ve learned with a few high profile cases over the years, your loved ones can find hefty taxes, fees and penalties levied against them.
These are some costly mistakes many people make when it comes to estate planning. Don’t let them happen to you.
1) Procrastination
People procrastinate for many different reasons, one of the most prominent being that no one really wants to dwell too much on the idea of their own mortality. It’s understandable.
Unfortunately, it may prove costly for your family in the event that the unexpected does happen. You want them to be protected. Since no one is guaranteed to live for the next five minutes, much less then next 25 years, it’s important to bite the bullet and get busy planning your estate. If you don’t have an estate plan, the government will decide for you.
2) Failing to Understand the Advantages of Life Insurance
Life insurance offers multiple advantages to your family once you’re gone. First, it helps to cover the costs of any estate taxes and operating expenses the estate generates, which can be substantial. It’s also wise to clue your family in to the finer points of managing the estate long before you’re gone, if possible, so that the learning curve doesn’t prove quite as costly as it may otherwise be when the next generation takes the reins – especially if they’re younger than you’d like them to be when this occurs. The second main benefit life insurance represents is that it can be used as a “tax advantaged” investment. You definitely want to discuss the many ways you can use life insurance as a tax advantaged investment with your estate planner so you can best protect your legacy for future generations.
3) An Overly Simplistic Approach
Simple plans work well for families with less than two million dollars in total assets. If your estate is larger than a million, however, it’s important to make sure you’re making the right decisions to maximize the benefits to your family while minimizing Uncle Sam’s take. While taxes are a certainty, there are steps you can limit the amount of taxes taken from your estate. A simple move, such as including provisions in your will or living trust agreements at the death of the first spouse can protect your assets from excessive taxation thus protecting your estate for your children.
4) Failure to Revisit Your Plan Frequently
You don’t have to revisit your estate plan monthly or even quarterly. However, it’s a good idea to revisit it with any changes in your life to make sure all the information is properly updated. These changes include new jobs, divorces, marriages, the death of aging parents, the death of a spouse and even milestones in the lives of your children.
5) Neglecting the Little Details
While you may feel as though a big weight has been removed from your shoulders once you’ve put the plan on paper, if you don’t follow up with the appropriate signatures, notarizations, etc. then your careful planning is in peril of negation.
In addition to these five big mistakes that can derail your efforts to properly plan your estate, there are a few things you’ll want to remember and include in the estate planning process, such as planning for pets, protecting digital assets and assigning guardianship for your children.
When you keep the mistakes you could make in mind, the success of your estate planning efforts is much more likely. Don’t forget to consult an expert to help you navigate the tricky waters of estate planning so you can rest assured your family is truly protected — even when you can’t be there to protect them.
For more information about getting started with planning your estate or your personal estate planning issues, please don’t hesitate to contact us!
