Did you know that 32% of Americans would rather get a root canal or do their taxes instead of making or updating their will? Estate planning isn’t always a fun business, but it’s an important part of managing your assets and desires for what will happen after you die.
We’ve all heard stories about mistakes people have made in their wills or trusts that have resulted either in mismanaged probate, or drawn out legal battles. Here are three estate planning mistakes you might be making, and how to fix them.
1. Be Careful Regarding Beneficiary Designations
According to Helen Modly, a wealth manager, inconsistent beneficiary designations can “wreak havoc on an otherwise well-structured real estate plan.” When do you designate beneficiaries? These are typical for when you sign up for retirement, or buy insurance. You might also have named them when you opened an investment account. Having outdated beneficiaries, such as an ex-spouse, can cause your assets to go to the wrong people, regardless of your will. Some parents also don’t realize that sharing accounts with children will automatically lead to them receiving the value upon the parents’ death, which can lead to other children becoming disinherited.
2. Not Being Responsible About Administration
If you have a son with money management problems, would it be a good idea for him to receive $100,000 at once? It’s important to remember that trusts can be an incredibly useful way to distribute assets. You can have these trusts administer money at regular intervals, or, solely for specific purposes (buying a house, a college degree, et cetera). They are often used for underage children.
3. Not Taking Taxes Into Account
Did you know that you can leave your family members and friends up to $13,000, after which, gift taxes will kick in as per IRS guidelines? It pays to plan carefully so that your loved ones won’t be hit with a hefty tax fee when they receive your assets. If you own a business that you want distributed as part of your estate, that, too, can potentially be financially tricky. Good estate planning attorneys can help advise you on tax and business laws regarding your estate, so that everything is squared away correctly.
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