Common Mistakes In Estate Planning
We have all heard about estate planning. But many of us have misconceptions. We think “But, thats for other people, right?” Wrong. Estate planning is for everyone. It is for the young and the old, the healthy and the ill. In short, estate planning is life planning.
Estate planning is for everyone. Even the young and healthy need estate planning to prepare for unexpected illness or injury by having powers of attorney and other plans in place. In fact, the death rate from automobile accidents is more than double for someone 20 compared to someone 60 years old.
Beneficiary designations are often forgotten. All too often, peoples lives change and they change their will or trust but do not coordinate these changes with their beneficiary designations. As a result, the bulk of their assets, such as insurance, retirement plans, and IRAs, end up going in ways that are no longer desired. This mistake occurs because assets controlled by beneficiary designations are not controlled by wills and trusts.
It can be difficult to contemplate ones own mortality. As a result, some people procrastinate in planning for what we all know will come in the fullness of time. Of course, those that plan will make for an easier time for family and friends. Planning is a loving thing to do.
When you plan, you choose people to make decisions for you, such as agents, guardians, executors, or trustees. Often, people do not give much thought to these decisions, just naming their oldest child or whoever pops into their mind. The choices for these roles are perhaps the most important decisions to make. Good choices can help to ensure your wishes are carried out while bad choices can create turmoil and waste assets.
Many people leave assets outright to their children or others without consideration of other options. Often, leaving assets in trust provides advantages for the beneficiaries. By leaving the assets in trust, the assets can be protected from the creditors or ex-spouses of the beneficiary, as well as from the beneficiarys own indiscretions.
Tax planning can be important for those with assets that would be subject to taxation. In Maryland, each person can pass up to $1 million without estate taxation. A couple can pass twice that amount with proper planning. There are many relatively simple ways to plan to minimize estate taxes on substantial assets.
Similar to procrastination, often people forget to update their estate planning documents when there is a change in their circumstances. Life is change. The birth of a child, divorce, re-marriage, substantial increase or decrease in assets, change in health, and many other circumstances can have significant impact on your estate plan. Periodic review of your estate plan can keep it current and in step with changing circumstances as life goes on.
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