Estate Planning Mistakes
What You Should Avoid: 5 Mistakes People Will Make When They Plan Their EstateWhen you’re planning your estate, there are several common mistakes that can be made. And, it’s important you understand these mistakes so that they can be avoided. After all, making these mistakes can have serious consequences for your family and your estate.
5 Commonly Made Mistakes When Planning Your Estate
1 – Believing Wills Don’t Go Through Probate
Wills are set up so they go through the entire probate process and, until they do, they have no legal effect. If you don’t want your will to go through probate, you need to have a Revocable Trust. This will automatically pass all assets you have to the person you appoint after you have died.
2 – Family Won’t Fight Each Other For The Estate
Don’t believe for one second that your family won’t be fighting for a piece of your estate after you die. Of course, the best way to keep them from being at each other’s throats is to generate a list that recognizes all your personal and business property and divide them among the persons you wish to inherit said property to. Give the list a legal effect by referencing it in a Trust or Will.
3 – Gifts Of More Than $13,000 Are Taxed
Another mistake folks make is thinking that the taxes are paid on lifetime gifts that are more than $13,000. In fact, gifts over this annual gift tax exclusion are taxable but are not payable on the lifetime gifts until you have surpassed the lifetime gift $1 million exclusion. You must fill out Form 709 Gift Tax Return for gifts that are more than the yearly exclusion. What you’re looking for is the effect of the gift’s taxable part to decrease the estate tax exemption correspondent that’s obtainable at the time you die.
4 – Using A Joint Title To Avoid The Probate
One very big mistake many estate planners make is listing the children’s name on assets (joint title). While a joint title of assets does keep it from going to probate, it also raises the possibility for certain kinds of risks such as:
- Assets misappropriation by one of the title holders
- Partial loss of assets to joint title holder’s creditors
- Increased risk of asset to joint title holder’s divorcing spouse
- Little to no control of the assets
- Possibility of estate confusion and aggravation when Will/Trust stipulates more than one beneficiary
- Unimaginable possibility of child dying before you, which leaves no way to come up with a backup plan exclusively through account titling
5 – Poor Planning For Incapacity
A final mistake many people make when planning their estate is not properly planning for their incapacitation. There are quite of a few people who do joint accounts for the sole reason of should they become incapacitated, the bills will get paid by the other person. Again, it opens the account for the risks noted above. If you want to plan for the possibility of incapacitation, have a financial durable Power of Attorney.