Estate Planning Mistakes to Avoid

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.

Unexpected Taxation

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.

Contested Wills

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.

Choose Wisely

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.


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