Five Common Estate Planning Pitfalls and How To Avoid Them
Estate planning is a crucial topic that everyone should take seriously. According to research, only 18% of seniors over 55 have their will already planned. If you are a senior and have possessions or a personal estate, you will want to pass it down to your loved ones when you depart. Depending on the extent of your estate and goods, and the amount of potential heirs, estate planning can involve complex processes to facilitate the transfer. This article explores common estate planning pitfalls and shares tips on how to avoid them.
It is easy to procrastinate when you think you have more time to attend to a comprehensive estate plan. You may be put off by facing your mortality, and you may be crippled by fear. Unfortunately, procrastination only brings more problems for you and the people you leave behind. These complications arise from your family not knowing who inherits your estate and any other property you own. Many Lehigh Valley families have faced the reality of fighting over the rightful ownership of unwilled estates. You can avoid this by planning your will and doing it in due time.
Early planning accommodates any delays that may be involved in the processes. First, designate beneficiaries for your assets if you have any in mind. In some peculiar situations, it may be necessary to establish a trust with the help of an attorney. As circumstances may change, a common error is to leave everything as it was from the first day the will was drawn up. However, legal experts say reviewing and regularly updating the plan is necessary. It should happen after crucial life events like divorce, marriage, grandchildren's birth, or the main beneficiary's untimely death.
Neglecting your beneficiary’s designations
The most important thing to realize is that the beneficiary’s designation allows you to transfer assets regardless of the terms communicated in your will. As is the case with the will itself, you must review the beneficiary’s designations periodically to avoid confusion in the future. It can be the name of a person or an entity, like a business, a charity, or a favorite organization. The probate lawyer, an attorney crucial to the estate settlement process, will guide you through listing your primary beneficiaries. Additionally, the lawyer will explain the role of primary beneficiaries in your will. Usually, primary beneficiaries receive equal shares of the benefits willed to them unless you specifically state the percentage each person must receive. Life insurance, annuities, and retirement savings are common assets designated beneficiaries can share equally unless otherwise stated.
Ignoring the importance of powers of attorney
Estate planning is serious business, and you cannot afford to neglect establishing powers of attorney. These legal documents grant a trusted person the power to make critical decisions on your behalf if you cannot do so. The person granted the POA will make financial and healthcare decisions that will be useful if you become incapacitated. The benefit of having a power of attorney is quite straightforward. It helps prevent your family from going through an expensive and lengthy legal process when there are questions. In effect, the person who assumes the role of power of attorney has the legal right to gain control over your affairs and make decisions as you would if you could. Remember to involve experienced probate lawyers while creating durable powers of attorney.
Furthermore, the person who assumes this role must be informed beforehand of your wishes. Sometimes, they may decline the role due to personal or conflicting reasons. In that case, it would be best to move on to the next trusted person who may readily accept the power of attorney.
Failing to factor tax into your plans
It’s worth noting that there is an estate planning tax. If you want to reduce potential estate tax liabilities, you must do everything possible to understand these taxes before they escalate into future inconveniences. Unfortunately, people often underestimate the impact of these special taxes. Surveys reveal that people do not understand the existence or impact of these taxes. It is easy to assume that these special taxes have nothing to do with them. You should know that there is some tax to pay no matter how small the estate is. Avoid unpleasant surprises by involving an experienced estate planning professional. You can rely on their experience to draw up tax-efficient strategies that work for your loved ones upon your death. One of these tax-efficient strategies is to give assets to charities whenever possible. That can be done at any time of life and can be included in your will. There are other tools like trusts to reduce tax burdens, and you can do the same for your estate planning. The objective is to save more assets or wealth for your beneficiaries so they don’t have to be surprised or burdened by estate taxes.
Failing to acknowledge family dynamics and conflicts
Every family has its fair share of problems that may be peculiar to them. Some get resolved, while others cause further strain among family members, especially when a will is involved. Family conflict needs to be considered during estate planning. Unresolved conflicts can spark litigation over the estate. When that happens, your primary beneficiaries bear the brunt. Sometimes, the court may grant a temporary hold on all asset disbursements until the case comes to a favorable end. That is why you must communicate openly and honestly with your family. You have no obligation to prematurely announce the details of your will. However, it would help if you communicated your intentions to avoid lengthy litigation processes when you depart. In some situations, your heirs may disagree with the assets or benefits assigned to them. You should be creative in communicating your need for harmony among them.
You may believe you still have all the time in the world to settle matters pertaining to your death. Everything you own (and owe) will go to someone when you pass, so make wise, informed choices today to make sure your wishes are known to your loved ones!