Here’s the deal: six out of 10 adults haven’t started filling out their estate planning checklists yet. When it comes to estate planning, the entire process can be extremely stressful.
Thinking about hiring estate planning lawyers in the future?
To be quite honest with you, planning for the afterlife is difficult but it needs to be done correctly. Learn all about estate planning mistakes and how to avoid them below.
1. Not Making a Solid Estate Plan to Begin With
If you haven’t even begun filling out your state planning documents, you are in good company. Even if you have a plan that is poorly designed, it is still better than nothing.
Do you want your end-of-life care and estate determined by the court system and state laws?
To be more proactive, meet with a financial and estate planner to set up your estate and end-of-life plans now.
2. Not Keeping Your Estate Plans Updated
Another huge mistake is not keeping your estate plans updated, which should be done after every:
- Major life event
- Gigantic goal shift
- Public policy change
For starters, moving to the new state means that it’s a good time to review your previous estate plan. That’s because moving can cause some serious issues for several different kinds of legal documents like trusts and wills.
What should you do? The answer is simple: whenever a family member dies or is born, take another look at your estate plan.
3. Not Planning for Long-Term Care
We get it: not too many people plan for long-term care when it comes to their estate planning documents.
To be quite honest with you, most of us will need long-term care for disability before the end of our lives. Whether it’s a nursing home or a rehab center, it’s going to cost you a pretty penny to get the care you need as well. That’s where your state plan comes in.
Sadly enough, not saving enough money for your retirement is the biggest risk that retirees have to deal with nowadays. If you are still a member of the workforce, planning for disability is all about having the perfect amount of long and short term insurance.
As a long-term solution, take a look into long-term care and disability insurance as soon as possible. Keep in mind that the longer you wait, the more expensive it is going to be.
4. Not Thinking About Estate Tax Liabilities
Have you considered thinking about estate status liabilities yet?
Although you might think that estate tax liabilities are only reserved for the rich, you’d be dead wrong. Even though this might be true at the federal level, it is not exactly true at the state level.
If you play your cards right, you might be able to write off millions of dollars in taxable real estate from federal taxes.
5. Not Having Property Asset Ownership
One of the biggest estate planning mistakes you can make is not having your property asset ownership lined up. In case you didn’t know, estate planning can reveal several oversights about assets and ownership.
First of all, some people make that mistake of not co-owning property with spouses. Occasionally, one spouse might want to separate their property assets from their printer. If you co-own it, you’ll have creditor protections upon the first partner’s passing.
6. Not Thinking About the Impact of Income Taxes
Raise your hand if you haven’t thought about the impact of income taxes on your future yet. If your hand is still in the air, listen up: assets that you leave behind for your children can create income tax for them.
You may already know that your 401(k) and IRA are subject to minimum distributions after you turn 70. However, you might be surprised to find out that inherited money is also subject to these rules.
If you have the time, convert your traditional IRA to a Roth IRA before it is too late.
7. Not Planning Ahead for Minor Beneficiaries
If you haven’t planned ahead for minor beneficiaries, you have already made a huge mistake. Of course, any parent would want to make sure that their children will be taken care of in the event of their death.
To make sure that your little one’s future is handled, you’ve got to have a legal will ready that designates a proper guardian. Be sure to ask a friend or relative first before putting them on the list.
Make sure you spell out how you want the money to be used as well. Don’t forget to get life insurance for your child too.
8. Not Incorporating Charitable Gifts
Don’t make the mistake of not incorporating charitable gifts in your estate plan.
Whether it’s an alma mater or a church, leaving something behind will maximize your federal tax benefits like never before.
9. Not Having Enough Liquidity
For the uninitiated, not having enough liquidity is a big deal, especially after you die. If you have to split your assets among multiple children or spouses, you’ve got to have the right amount of liquidity first.
To set up your future the right way, invest in life insurance to:
- Create estate liquidity
- Split up wealth
- Pay off debts
Simple as that.
10. Not Reviewing Retirement Accounts
Last but not least, the final mistake you can make is not reviewing retirement accounts properly. To avoid this, make sure that your 401(k) and IRA documents are updated with the right beneficiaries.
Not sure how to handle your family estate dispute yet?
We highly recommend that you contact an estate planning lawyer now.
Don’t Make These Estate Planning Mistakes
Are you stressing out over planning your estate for the first time?
If that’s the case, our handy guide is here to prevent you from making these rookie estate planning mistakes.
Don’t forget to check out more of our blog today.