Common Estate Planning Mistakes and How to Avoid Them
The purpose of estate planning is to make decisions now that will protect your property later in your lifetime and ensure that it will pass to your intended beneficiaries efficiently after you’re gone. It’s an unpleasant task that is too easily put off, and many people don’t give it the attention it deserves. Worse still, mistakes made in estate planning can negatively impact the eventual results.
The following commonplace planning errors fortunately can be avoided with some modest effort and professional guidance:
- Incomplete planning — A person might write a simple will leaving their estate to their surviving spouse and alternatively to their children. But as assets and families grow, so does the need for a more comprehensive estate plan. A simple will does not include devices for managing assets during one’s lifetime. A living trust might be a better vehicle for serving your overall intentions.
- Failing to name a personal representative — Perhaps the most vital component of estate planning is putting someone in charge of effectuating your intended distributions. This position carries a significant amount of authority and responsibility. You need to name an executor in your will or a trustee to manage your trust. It’s also important to specify alternative choices for these positions in case the main designee is unavailable or unable to serve.
- Failing to update the plan — A will and other parts of an estate plan should be reviewed periodically and after major life events. Beneficiaries die and new family members are born or brought in through marriage or adoption. Couples get divorced and may remarry. Those named as personal representatives might die, move away or otherwise be unable to serve.
- Failing to account for beneficiary designations — Some financial assets pass directly to designated beneficiaries, outside the terms of a will or trust. Examples are insurance policies, pay on death (POD) bank accounts and 401k accounts. It is important for people to make sure to change the beneficiaries of these accounts as appropriate or necessary.
- Ignoring tax implications — Many people execute a will or estate plan without considering the potential tax bite on the estate or the beneficiaries. Estate and inheritance taxes vary from state to state and the tax rates can be quite high. What’s more, taxes can apply to all of your assets, not just those passing through your will. An estate planning professional can help you structure your estate to minimize tax consequences.
- Poorly communicating — A comprehensive and thorough estate plan is wasted if the documents cannot be located. Your will and other documents should be stored in a safe but accessible place that is known to the people who will most likely be involved in the administration of your estate.
The Law Offices of Maurice Verrillo, P.C. provides estate planning services to upstate New Yorkers throughout the greater Rochester area. Feel free to contact us online or call 585-563-1134 for a no-cost initial consultation.