One of the biggest decisions of your life comes when you decide to start a family. Another one is taking care of your family after your death.
For that, you need to think about estate planning. Don’t worry. We’re going to make it easy for you.
Here are a few common estate planning mistakes everyone makes so you can learn from the mistakes of others.
- Failing to Acknowledge Outstanding Debts and Obligations
Before establishing an estate plan, it is important to inventory any existing obligations thoroughly. This includes, but is not limited to, any money that may be owed on:
- credit cards
- loans
- mortgages
- business debts
- taxes
- other obligations
Not correctly addressing debts and obligations can result in them being passed on to successors. This being part of the estate leads to financial hardship.
If there is any uncertainty or you are unsure how to plan your estate, it is important to speak with a financial advisor or attorney for estate planning help. This is to ensure that all obligations are properly addressed.
- Putting Off Writing a Will or Trust
Without either of these documents, you leave your loved ones in the dark regarding your wishes upon death. This can result in major disagreements and undesired division of your property or assets. Moreover, your family or heirs will be responsible for hefty taxes, expensive probate fees, and administrative costs without a proper and comprehensive estate plan.
Additional risks associated with not writing a will or trust include allowing creditors to access your estate, preventing a smooth transition of your business to an heir, and distributing your possessions and assets to someone you would not want to receive them. Discover more here about the different types of trusts available for you.
- Ignoring the Role of Taxation in Estate Planning
Depending on the size of your estate and the types of assets you own, estate taxes could significantly reduce your inheritance. Estates worth over $11 million in 2021 are subject to 40% federal taxes, and state taxes can be even higher.
Unnecessary amounts of taxable income can result if trusts holding assets aren’t designed properly but understanding the potential issues and exploring solutions with an attorney or financial planner can save you and your estate a lot of money.
- Neglecting to Identify Beneficiaries
Without this information, your estate plan may not disperse funds according to your wishes. It is important to understand who your heirs or beneficiaries should be and how cash, investments, and property should be distributed. Furthermore, when making investments, it’s important to ensure that each financial account is properly “titled” with the full name of the person(s) you want to benefit from.
Failure to update beneficiaries when needed can lead to serious issues later on. Additionally, consider naming alternate beneficiaries in case your chosen beneficiaries predecease you. Make sure to fill out beneficiary forms at the time of purchase and double-check them periodically to confirm they are up-to-date.
Avoid These Estate Planning Mistakes
Estate planning is an essential part of life, but several mistakes can be easily avoided. These mistakes are often costly and time-consuming, so it is important to plan with care. Consider consulting with an experienced attorney before making any estate planning decisions to ensure success.
Start planning the future of your estate today!
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