Avoiding the Trap of Wealth to Poverty
Let’s talk about your estate plan. First, do you have one? Second,
if you have planning documents in place, have you reviewed them lately?
If you’ve answered yes, fantastic! You are ahead of the game and
are more prepared than nearly half of all Americans to date. * If your
answer was no to either, time to take a look and some common mistakes
that could potentially take your family from wealth to poverty in less
than two generations.
Sibling Rivalry May Develop
If there are family members that do not get along while you are still living,
there is no reasonable expectation to believe that they will do so after
your death. Plan for it. Emotions will already be heightened, particularly
when a parent dies. If sibling rivalry plays out for an extended period,
your children may end up wasting their inheritance on court and attorney
fees unnecessarily. If your distributions are unequal, or in any way different
between children, it may be a good idea to have a conversation ahead of
time to help avoid the risk of your estate being litigated.
Surprises can be fun. Except for when they cause heart ache or financial
distress. When you pass along items from an estate, the recipients will
incur taxation for the gift(s). Rather than allowing your loved ones to
fend for themselves, plan for payment of these taxes. Set aside funds
within your estate or anticipate the sale of a particular asset so that
the proceeds can cover at least an estimated portion of the gift tax.
If you do not, it is possible that any proceeds from the estate may not
cover the expense, leaving your loved ones with debt instead of inheritance.
It’s in the details. Having an estate plan is not enough. You must
review it regularly, making changes and adjustments to address the life
changes that occur over time. Marriage, divorce, blending families and
other occasion are cause to review your estate planning documents. Children
and other family members that have been excluded, whether deliberate or
unintentionally, have nothing to lose by challenging your will and other
legal documents. Spending unnecessary hours in probate or on attorney
fees can quickly diminish your estate before anyone sees one dollar.
While alive and well, it may be hard to choose your ‘most valuable
person.’ But when you are gone, you need someone to speak on your
behalf and to carry out your wishes to the extent possible. Picking two
people (or selecting co-trustees) may work in some situations, but more
often than not, doing so has the potential to add undue stress to an already
emotional time. Select a person that will make concise decisions in a
timely manner. Certain actions regarding your estate can come with large
penalties if not completed according to federal and state timelines. You’ve
presumably paid your fair share of fees to the government over your lifetime,
so do not allow your estate to diminish due to a lack of decision-making.
Surround your trustee with the right group of advisors, but allow one
person to handle both the responsibility and liability of being your representative.
Talk through the tough family matters. The best gift you can give your family is peace of mind. Talking about
these issues and sharing your thoughts with family members will help keep
you accountable to your personal family goals for estate planning. We
are here to help address tough family matters. Call us today.
* (source: dailyfinance.com)