Tag Archives for " estate planning "

Most people view estate planning in the same way they view a root canal: Put it off until the pain is too great to ignore any longer. Also, those with little income or net worth believe that estate planning doesn't apply to their situation. But estate planning is much more than just the allocation of cash, real estate, and other assets. There are other things to consider, too.

There are many errors that occur again and again in estate planning. Avoiding these mistakes is half the battle.

Steer clear of these mistakes for a successful estate plan:

1. Procrastination. Estate planning is a little like completing a tax return. No one really wants to do it. But it's so important to push your reticence aside and get it done!
2. Not paying attention to the conflicts that exist within your beneficiaries and estate plan. For example, if your will declares that your husband receive your retirement account, but your ex-husband's name is still listed as the beneficiary, this could prove to be a big challenge.
3. Not using the unified credit to your advantage. This only applies to those with a significant net worth, but this mistake is made regularly. In most cases, assets pass to the surviving spouse. Up to $5,250,000 can be excluded from taxation.
   • If this isn't handled properly, though, the surviving spouse will only have their exclusion available when passing assets on to their heirs.
   • There are ways to potentially shelter this money from taxation in the future. One solution is a credit shelter trust.
4. Not having adequate life insurance. Life insurance can be a great estate-planning tool for the affluent, but life insurance is vital to those with low income as well.
   • Consider how your family will survive financially if you or your spouse were to die unexpectedly.
   • If you have significant wealth, you might consider using life insurance in conjunction with an irrevocable trust for tax purposes. An attorney that specializes in estate planning can make recommendations based on your unique situation and explain the details.
5. Creating a plan that lacks flexibility. Creating a plan with a little wiggle room will allow your heirs to take advantage of any new laws as well as use the assets in the most advantageous fashion.
6. Not gifting assets. Up to $14,000 can be gifted to each beneficiary per year without incurring a gift tax. This can be a great way of reducing the taxes imposed on your estate at the time of your death. You also have the chance to see how well your beneficiaries can manage your assets.
   • Additionally, you have the advantage of being able to witness someone enjoying your assets. You can't do that after you're gone!

Estate planning isn't the most enjoyable activity, but it is likely to be one of the most important things you do for your family.

Everyone should have a basic estate plan that spells out their wishes. This is important even if there are no children or assets. An attorney can be invaluable unless your estate is very simple. And even then, the $100+ it will cost to have an attorney take a look at your documents will be money well spent.

Perhaps you, like many others, believe that once your will has been drawn up, that's the end of the process. While wills have never been anyone's idea of fun, it's important to review your will on a regular basis. There are many reasons to pull out your will and give it a thorough review.

Let's examine the most common reasons:

1. New family members. In general, if a will is worded properly, any children that are born after the will has been signed will be entitled to the same share of the estate as the pre-existing children. Even so, if you have a new child, check with your attorney just to be sure everything is worded according to your wishes.
   • Also consider how your wishes might change based on other new people in your life. What if you re-connect with a family member? What if you make a new best friend? Maybe one of them would be the person to take good care of your boat when you're gone. Consider all new people who've entered your life since you signed your will.
2.  Moving. States have different laws regarding estate taxes and how property is treated. So if you move from one state to another, there may be some major issues that need to be examined. Consult your attorney anytime you move to a new state as this can have significant ramifications.
3. A windfall. A large increase in your wealth may require another look at your will. Again, this depends on your state. Some states have monetary limits for certain types of inheritance items. Creating a trust might be the right move for you now.
   • With your new wealth, you may also have a greater degree of flexibility to take advantage of certain tax shelters. And you might be considering being more generous regarding who's included in your will.
4. Divorce. Most of us aren't interested in leaving anything to our ex-spouses. If you've gotten divorced since your will was drawn up, it's time to talk to your attorney. A proper and thorough revision will reduce the likelihood of the will being contested. Consider the fact that if you don't change this document, your ex could end up with everything!
5. Death. If your spouse or only child passes away, your will should undergo a thorough review. This event may radically change how you wish to distribute your assets. Back-up recipients are usually specified within a will, but it never hurts to take another look.
6. Change of heart. Most wills are drafted by people who are still quite young. As you age, however, your wishes may change. Maybe you were very close to your brother at one point, but haven't spoken to him in the last five years.
   • Additionally, as some people age, they become more involved with charitable organizations. Maybe you'll have the desire to include such a group in your will.

Your will we most likely not be a static document throughout your life. As your circumstances, family, and social connections change, some modifications will likely need to be made.

Review the list above and note if any of these items have occurred since your will was completed. If so, schedule some time with your attorney today. In this case, more than in many others, it's better to be safe than sorry.