With no estate plan, you can leave your family to pay thousands of dollars in extra taxes or fighting bitterly with each other. Senior Homes’ recent article, “7 Common Mistakes to Avoid When Planning Your Estate,” shares some of the most common mistakes.
- No estate plan. Everyone should have some type of estate plan, including a will and related documents to protect your spouse, children and assets. It’s common for families in crisis to only begin to scramble and create a plan when it’s too late. Make these decisions before there’s a crisis, when parents have capacity and when it's possible to act to accomplish their goals.
- Failing to keep your will up-to-date. Many people “set it and forget it” when making an estate plan, but this is another common mistake. You should regularly review your estate plan, especially after major life events, such as divorce, adopting or having another child, or buying or selling real estate. Estate and tax laws change, but not as fast or as often as family dynamics.
- Ignoring state taxes. If you move out-of-state, you need to consider your new state’s taxes. Although the federal estate tax exemption is $5.49 million, many states have their own estate and inheritance tax laws. Their exemptions are much lower than the federal amount, so you could be impacted.
- Leaving everything to your spouse. Leaving everything to your spouse outright and relying on his or her word to take care of the children might be a mistake, especially if your spouse remarries. If that were to occur, your spouse’s new partner could grab a much larger share of your assets—leaving your children with less. You may want to create a trust as a solution.
- Assuming your kids will all continue to get along. Family fighting can be worse, when there’s a death of a family member. Even if your family is getting along now, things can change. This is especially true when money is involved. If you don’t have a clear plan, your family could battle over control of assets. There might also be hard feelings over the way things were divided. A lack of guidance on family assets can lead to fighting.
- No communication or a lack of specificity. Communication is critical, and you should make certain you’re as specific as possible—even about organ donation and burial or memorial services.
- Identity theft. Unfortunately, schemers target older Americans, especially when they start losing their capabilities. Some even try and take advantage of the death of a family member, by reviewing obituaries for personal details to exploit.
Reference: Senior Homes (September 6, 2017) “7 Common Mistakes to Avoid When Planning Your Estate”