How To Avoid Common Estate Planning Mistakes

How To Avoid Common Estate Planning Mistakes

  • Law
  • October 4, 2022
  • 218

Prepare an estate plan and safeguard your family’s future. Use an estate plan to divide your estate among your loved ones. An estate plan should have the power of attorney. Make a plan for your future medical care through an estate plan. Design the right plan. Involve experienced attorneys in Melbourne, Fl. Don’t make the following mistakes when drawing an estate plan.

No Estate Plan

Without an estate plan, your loved ones will be left to manage your assets. Your kids and the surviving spouse will be in shock. They’ll be mourning your death and dealing with grief. At this point, they may not be able to manage your final affairs effectively.

Having an enforceable will in place will provide your family members with a clear roadmap for handling your affairs. Plus, knowing there’s a legally valid estate plan or trust will give them peace of mind.

Not Updating It Regularly

Don’t forget to update your will regularly. Remember, life won’t always be the same. Things will keep changing from time to time. More kids are born, someone starts a company, and parents acquire more property. With all these changes, your original estate plan might not work as you intended.

Many situations can force you to update your beneficiary designations. For instance, you might have gotten a divorce or added children to your family. It’s always advisable to periodically review your will and life insurance policies to fit your new life events.

Forgetting Disability

According to research, one in every ten workers will be disabled after their retirement age. But most of them aren’t aware of their heightened risk for disability. Talk to your lawyer about enforcing a living or revocable trust.

A durable power of attorney is meant to provide a trusted person with the authority to make important decisions on your behalf. You may also want to consider assigning temporary power during the time of your incapacity.

Putting Your Property To Kids

Most people tend to put their child’s needs on their title deed. They believe it’s the safest way to protect their property. But unfortunately, this is one of the worst solutions to property transfer.

Putting their name on your home’s deed will entitle them to your property. In worst-case scenarios, they can kick you out of that property and even sell it. In short, this will make you lose control of your investment.

Thus, before making your final decision, be sure to get legal advice. Your estate planning attorney will recommend the safest way to transfer assets to minimize tax-related effects.

Not Considering Nursing Home Care

Make sure that your retirement plan includes nursing home care. Pre-planning for this type of medical care can guide your financial decisions for many years to come. It can protect your surviving spouse while ensuring that they qualify for Medicare funds. The best way to go about this is to invest in a special needs trust.

Selecting Wrong Executors

Be careful when choosing your estate executor. It can be difficult to know who’ll best handle your funds or take care of your children. Whereas your surviving spouse might look like the best choice, they might be too devastated to handle the complex probate process. Plus, they may not have the right expertise to manage finances, investments, as well as, tax laws.

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Not having A Trust

Tax planning is a crucial part of estate planning. If you want to minimize your estate taxes, consider creating a life insurance trust. Building an irrevocable life insurance trust will ensure that your proceeds aren’t taxed. Furthermore, this can save your loved ones the tax burden associated with insurance proceeds.

Not Making Gifts

Annual gifting can potentially reduce the impact of estate taxes. Giving out large gifts to your loved ones will prevent them from paying huge estate taxes. So, if you haven’t thought of gifting your heirs yet, then it’s time you do so. When it comes to estate planning, gifts play a significant role. They can drastically lower your income and estate taxes.

Procrastinating

Don’t wait until it’s too late to formulate your estate planning goals. Will drafting isn’t just an old people’s affair. Anyone can create a living will to inform their family members about their medical wishes. A medical power of attorney is designed to give a trusted person authority to handle your medical decisions.

If you’re planning to go for a trip overseas, you may want to consider giving temporary power of attorney to a trustworthy individual to allow them to make important decisions on your behalf.

Similarly, a young couple with kids, even if they don’t have significant assets, will still want to name a guardian. So, don’t assume that estate planning is only meant for the elderly. Anyone can draft a living will or trust to express their wishes.

Choosing The Wrong Attorney

If you suspect that conflicts might arise, then it pays to hire a professional estate planning attorney. He or she will provide you with effective tax-planning strategies, as well as, a deeper insight into state and federal tax laws.

The attorney will also strive to ensure that your documents are well-drafted and stand up to the adverse legal challenges. A qualified lawyer will assist you in making the right decisions about the transfer of your assets.

Key Takeaway

Drafting an estate plan allows you to transfer assets to your beneficiaries with minimal tax liabilities. Plus, it can go a long way in preventing estate litigation among your heirs. A well-drafted estate plan can maximize the value of your assets and streamline the distribution process.

The Bottom-Line

Don’t assign your kids properties. Put your assets under a trust for better management. Hire the right lawyer. Choose a trustworthy executor. Draft a legal will. Your estate plan cannot have a single beneficiary. Follow all the procedures. Get guidance from your lawyer. Remember, simple mistakes can send you to squire one. Plus, it can lead to legal battles. Don’t make the above mistakes when drafting your estate plan. 

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