Creating an estate plan is a serious undertaking. You’ve spent a lifetime accumulating assets, so their eventual distribution should be in tune with your wishes. While even taking the steps to compose an estate plan shows diligence, it ultimately needs to be well-constructed in order to ensure a seamless execution.
As with so many important processes, the blueprint for creating a good estate plan includes certain missteps to avoid. By dodging these common pitfalls, you can better solidify your loved ones’ future when the time does come.
1. Failing to keep your will updated
This seems like a simple mistake to avoid, but an unfortunate amount of people simply write a will and think that’s that. The truth is, however, life can change. Children are born, people get married or divorced, and how a will was initially drawn up may not mesh with these types of events. A will deserves a periodic revisiting to make sure that it’s still in line with your goals.
2. Not taking steps to reduce your estate tax
The IRS allows each spouse to give up to $15,000 per year in gifts that are exempt from estate tax. Such acts of giving can greatly decrease your tax burden, which ultimately means more funds that can go to your loved ones.
3. Not keeping your account paperwork current
In truth, all estate planning documents warrant an annual review. This is especially important when it comes to beneficiary designations. It’s not unheard of for a retirement plan or other account to go to an ex-spouse because the beneficiary wasn’t kept current.
4. Not accounting for disability
A sudden disability can strike at any time. Such an occurrence can be financially draining and may render you unable to make your own decisions. Appointing a power of attorney to handle financial items and healthcare directives—should the circumstances call for it—is often in your best interests.
5. Placing your child’s name on the deed to your home
A home is often a marquee asset in an estate plan, so it’s usually heavily taxable. With this in mind, you should think twice about putting your child’s name on your home’s deed. While gifts below $15,000 are exempt from estate tax, anything above that threshold is not, so it makes more sense to pass it on as an inheritance.
