If you have any assets, property or important belongings, then you should develop an estate plan. Regardless of your age, if you have anything of personal or financial worth, then it’s important to determine how they will be dealt with once you pass. This is especially true if you have family and loved ones. Contacting a probate lawyer O’Fallon MO prefers should be your first step. They can help you determine who and what you intend to include in your Will, as well as ensuring the necessary requirements are completed. In addition, they can help you avoid problems and mistakes that are quite common with estate planning. The following is a list of mistakes to avoid when planning your estate:
- Not Having an Estate Plan
The number one mistake is not having an estate plan at all. If you pass unexpectedly without a plan, then your property, assets and belongings can be mishandled, and your loved ones may not be take care of properly.
- Waiting too Long
The reality is that we don’t know our future. It’s important to prepare an estate plan as soon as possible just in case something were to happen to you.
- Not Revising Your Will
Anytime a significant event or major milestone in your life occurs, you should update or revise your Will. This may be the birth of a child, the death of a beneficiary, a divorce, or the acquisition or loss of money or property. In such case, you may want to either remove or add someone to your Will, or reallocate parts of your estate.
- Choosing the Wrong Person as Your Executor
An executor has very important and vital duties, including that of managing and distributing your estate in a proper manner. It’s important to not only choose someone who is trusting and responsible, but also someone who will not be too burdened by your death to properly handle such duties. Therefore, it may be wise to choose a close friend, as opposed to your mother or child. Someone heavily impacted by your death will likely be consumed by the grieving process.
- Not Creating a Life Insurance Trust
A life insurance policy will be affected by estate taxes after your passing. To avoid a portion of your life insurance being taxed, it is wise to create a life insurance trust. Your policy will be transferred to the trust where it will not be affected by estate taxes and will be made available for family members.
- Not Planning for Incapacitation
It is important to plan for a case in which you become incapacitated by an illness or injury. During such time, you will need plan for the management of your estate, choose a caretaker for your children, and designate someone to make medical decisions on your behalf. Before something like this happens, you should create a living trust and appoint a power of attorney.
- Naming an Heir on Your Home’s Deed
Adding your child’s name in the deed of your house constitutes it as a completed, and could end up piling taxes onto them. In some states, gifts over a certain monetary amount can be considered in estate taxes. In addition, they may also be subjected to capital gains taxes and gift taxes.
- Mishandling Taxed Components
Mishandling asset and property can accumulate unnecessary taxes and leave your loved ones with a financial mess. You should contact a tax attorney when planning your estate, because they have the knowledge and understanding to help you navigate and handle tax-related components of your estate.
- Not Taking Advantage of a Spouse’s Federal Exemption
If you are married, there is a federal exemption of $675,000 on estate taxes. If you or your spouse dies, a portion of the estate will be placed into a credit shelter trust or an exemption trust. It’s important to take advantage of this.
- Not Using Gifts
Gifting can be a useful way to reduce estate taxes. The IRS allows gifts amounting up to $14,000 per year to be deducted from the estate tax.
Thanks to our friends and contributors from Legacy Law Center for their insight into estate planning.