Everyone makes a lot of plans—whether they’re small plans for the day, or bigger plans for the future centered on your job and retirement. However, one area that tends to be commonly neglected is planning for your estate.
Even if you’re still young at the moment and you think you’ve got a whole life right ahead of you, estate planning is, still, important. This encompasses everything surrounding the administration of your estate upon your demise. This gives you control over how you wish your assets to be distributed, for the protection of those you love and for the preservation of everything you worked so hard for.
Making sure that your estate plans are done the right way through the help of experts, such as www.milehighestateplanning.com/, also means an awareness of what not to do. Remember that it’s very important to do it right while you’re still alive. Once it takes full force and effect upon your death, you no longer have any control over it because you’re already gone.
So, if you’re planning on going through the estate planning process anytime soon, here’s a list of some of the most common mistakes that you should avoid:
1. Not Having An Estate Plan
One of the most common misconceptions surrounding estate planning is that it’s reserved only for the millionaires or the rich. Hence, many still turn their backs on estate planning simply because they don’t think it’s necessary.
Not having an estate plan is bad for you. Without a will or a trust in place, this means that you’re giving the state full control over the administration and distribution of your assets when you’re gone. This means that your assets will be forwarded to the court for the estate proceedings or probate. Your wishes aren’t recorded, so these aren’t followed. As to your children, if you don’t have a designated guardian, it’s the state that will pick one for your children.
The danger with this is that money will always be a cause for trouble, particularly when families will fight over it. With an estate plan in place, however, family disputes can be avoided.
To understand more the dangers of not having an estate plan, read these points:
- Messy asset distribution – An estate plan provides a guide for the court and your family as to how you wish your assets to be distributed. This ensures smooth and proper flow of asset distribution, according to your wishes. It’s your estate plan that’ll hold the details as to who and who’ll not receive any inheritance from you.
- No end-of-life care – Unknown to many, an estate plan isn’t just about how your assets will be managed upon your death. It also has a lot to do with what’s known as end-of-life care. This refers to how your care, life, and finances are going to be managed when you’re nearing death due to sickness or old age. Unfortunately, you’ve got to be ready to accept the fact that you’ll eventually lose power because of getting incapacitated in your later years, or due to accidents or injuries. Having an estate plan through a living will or power of attorney can give your surviving family members insights and instructions on your care wishes.
2. Not Updating The Estate Plan
Another common mistake people make when it comes to estate planning is that people who have an estate plan don’t update it simply because they think that it’s already enough—false. This isn’t a thorough planning of your estate.
Rather, it’s important to keep your estate plan updated regularly. Remember that your situation now might be different years later, so it’s necessary to make the changes accordingly.
First off, a trust requires regular maintenance. Take note that the assets you’ll gain after creating the trust are yours. This means that they don’t belong to the trust you’ve created. In effect, upon your death, the properties won’t become part of the estate plan. It’s, then, up to the state to have control over distributing these assets. If you want them to function as they’re intended to, then you’ve got to be diligent about their maintenance.
Second, the decisions you made surrounding your assets five years ago may no longer be the same now. Perhaps, your priorities have already changed. Legally, these pertain to the tax liabilities and exemptions, for instance. Estate lawyers are well-versed with structuring estate plans, such that you’re able to maximize a property’s value and not lose a significant chunk of it to taxes. But, laws and values can change in time, so it’s important to stay updated.
Third, there may also be changes in your family structure that you have to be conscious about. For example, you might have children to whom you designated properties who passed away, or have been incarcerated or admitted to a rehabilitation center. These would render them incapacitated to take charge of the properties. On the positive side, you might have more children now. If you don’t create the necessary changes in your estate plan, then, those children born after your estate plan was created won’t be included in the administration of your estate. This, instead, will be left in the hands of the state.
At the very least, it’s highly recommended to update your estate plan at least once a year.
3. Not Planning For Estate Tax Liabilities
The amount of assets you have now won’t be received in full by your heirs or beneficiaries upon your death simply because there are tax liabilities you have to fulfill. Depending on where you’re reading this from, your country or state will most likely always have federal or state tax laws attached to your property. So, be sure that you plan for these as well. You don’t want your beneficiaries to be burdened with such taxes. Planning early gives you more options for tax reductions and the like.
To enlighten you more, here are some important things you ought to know about estate tax:
- It’s a transfer tax, not an income tax. When you die, estate tax is that one on the property transferred from you to your heirs. While you have the right to transfer properties upon your death, this is something that comes with costs. Everything that you own will have an interest attached to it. The taxable amount from your gross estate is taken after deducting certain deductibles, like funeral expenses, administration expenses, and mortgages.
- If you don’t plan for it, it’ll sneak up on and eat up your estate. The last thing you’ll want is for your heirs, particularly your children, to suffer the dire financial consequences of having to pay for the taxes of your estate. While these may not always affect the higher-income individuals, if you’re a middle-income taxpayer, these will hit you and your family the most. Don’t make the danger of ignoring the total value of all your assets, including life insurance policies.
4. Not Planning For Home Care And Disability
If you’re really lucky, you could be one of those who get to live until a ripe old age. If this is the case, then it also means that decisions surrounding your disability and home care are very important. When the time comes that you’re already incapacitated, you don’t want to feel hopeless and useless. It helps to still have control over your disability and home care, so that your comfort is lifted, in general.
That said, a disability and home care plan should also be included in your estate plan. This would give your family members an opportunity to follow your directions and your wishes, so you get the best care possible.
For instance, would you wish to live with a family member, but with the assistance of a dedicated home nurse? Or, would you rather live in an assisted facility or care home? In your senior years, it can give you a better quality of life when you feel like you haven’t lost control over your own life.
5. Not Being As Detailed With Plans Surrounding Minor Children
Including minor children in your assets goes beyond simply naming them as beneficiaries to some of your properties. Also, there’s more to it than assigning a guardian that’ll hold the trust to their inheritance before the minors themselves get a hold of them.
If you’ve got minor children, your estate plan should also be detailed so as to include the other expenses related to these dependents. These should include money allocated for their education and care, for instance. If your minor dependents also have special needs, then these should also be discussed in your estate plan.
When you’re that detailed, you can ensure that your minor children will still get the education and care they deserve even after you passed away.
These are only some of the common mistakes surrounding estate planning. Hopefully, being enlightened about these will help you know what you should avoid in the estate planning process. At the very least, you want to ensure that your estate will be managed according to your wishes even when you’re no longer physically around. Then, there are also the legal matters surrounding administration, taxes, and even probate that you need to take into consideration.