Estate Planning Mistakes
Estate planning is a delicate but necessary topic to address. Whether you are assisting a parent with getting their estate planned or doing it for yourself, you must pay attention to all the details to ensure matters go exactly as you want them to when you or your loved one has passed. There are a number of common mistakes you can avoid with the right approach.
Use our estate planning for dummies guide to help you avoid common errors and ensure your beneficiaries get the most from your estate.
Designate the Right Beneficiary or Beneficiaries
You may want to leave your children a large sum of money, but do you think they can handle it responsibly? Figuring out your beneficiaries calls for an honest assessment of everyone you plan to include. Consider family politics, too, as frustrating as they may be. If you have family members who don’t trust each other, you may need to consider leaving them out of your estate.
Consider Trust and Fairness for Your Executor
The executor of your estate doesn’t have to be your eldest child or another arbitrary designation. Think about the person you most trust to handle a sensitive matter in your life right now. Even if that’s a family friend, you may want to choose them as executor rather than a family member. Just make sure it’s a person whom your entire family trusts. This will eliminate issues as the will is executed.
Update Your Retirement Accounts
Often when people leave jobs or take their retirement, they neglect to update the beneficiaries on their 401(k) or other retirement plan. Revisit these designations to ensure your first spouse or a sibling you are no longer on good terms with is not named the beneficiary. That will lead to chaos and conflict when you are gone.
Update Your Insurance Policies
You should also check the beneficiaries of any life insurance policies and look at the total worth of those policies. Can you adjust them to aid your beneficiaries? Do they understand the tax liabilities associated with the policies?
Address What to Do if a Beneficiary Passes Away
If you have designated someone as a beneficiary and they pass away, immediately update your estate, your 401(k) and your insurance. Failing to do so can lead to your money going to the estate of the late beneficiary, which could benefit someone you don’t even know.
Rethink Selling Your Property for a Small Sum
Have you considered selling your $500,000 house to your child for $1 in an effort to get the most for your beneficiaries? Well, this tactic could backfire. The government understands that the value of your house is actually much more than $1, so it will treat your generosity as a taxable gift to your child, and that could result in bills they cannot pay.
Beware of Large Taxes When Reselling
Unfavorable taxes may occur with just about any transaction, so discuss anything you plan to do with your house with a tax attorney ahead of time to avoid huge penalties for yourself or your beneficiaries.
Update Asset Ownership
If you have gotten remarried since buying your home or you sold a car to your grandchild but neglected to turn over the deed, now is the time to get all these things in order. It can get messy for an estate when asset ownership claims are disputed. Find the most favorable arrangements for your family when updating these assets, such as putting your new spouse’s name on a mortgage.
Make Sure Assets Going to a Minor Mention Their Guardian
If you plan to leave an asset to a minor, such as a car to your 16-year-old granddaughter, make sure your estate names her guardian as well. You may also choose to set up a trust for the child and designate someone to oversee it.
Include a Residuary Clause
Every will should include a residuary clause, which covers the property not specifically mentioned in your estate plan. It covers everything that remains when all your bequests and gifts have been accounted for. You can designate beneficiaries for this as well.
Hire an Attorney to Help Plan Your Estate
Elder estate planning can be challenging for those without legal experience. If you feel uncertain about any of these steps, get in touch with MPL Law to discuss your estate planning needs. We listen to your concerns and advise you based on your particular circumstances. Get started on building an effective estate plan today by contacting our office.