The music icon Prince was far from the only celebrity failing to have a Will, the most significant estate planning mistake of all. Tobacco heiress Dorothy Duke named her butler the Executor of a $1.3 billion estate, and her family spent millions on legal costs before the estate was settled. You don’t have to be wealthy to make an expensive estate blunder, says a recent article from Microsoft Start Money, “Seven Estate Planning Mistakes You Can’t Afford To Make.” Regular people also make costly mistakes. However, they can easily be avoided by following these steps.
Procrastinating until the “right” time. Making decisions when you are under a time constraint because of an unexpected event is a bad time to do estate planning. Leaving a mess for your children to figure out will almost always end badly. Fighting among family members, assets lost to costly battles and unnecessary stress are just a few of the headaches.
Not updating your estate plan. Wills are like pets—they require ongoing care. As your children age, one may need asset protection as they are a spendthrift, for example. If you remarry and don’t update your estate plan or beneficiary designations, your new spouse will have little recourse to what you might have left them. The same goes for major changes in your financial life, up or down.
Putting your head in the sand about taxes. In the last 15 years, there have been many tax changes. Failing to address tax changes with estate planning in mind can lead to financial disasters. Remember, you may not be near the federal estate tax threshold. However, if your state levies estate taxes, you’ll need to plan for them.
If the lifetime estate and gift tax exemption reverts to pre-2017 tax law levels, “average” wealthy people with estates worth around $6.46 million will pay federal estate taxes. If this is your situation, start talking with your estate planning attorney now to address this change.
Ignoring incapacity. We’re not sure which is harder to consider, incapacity or death. Neither is pleasant to consider; one is likely, and another is certain. Having the right plan in place means having your Will, Powers of Attorney (both financial and health), Living Will and other relevant documents specific to your state as part of estate planning.
Forgetting to plan for non-cash assets. If you own a home, what do you want to have happen to the home upon your death? If you become incapacitated, who will take care of your home, your pets and any property requiring upkeep? Classic cars, antiques and art collections must be disposed of in a planned manner.
Neglecting digital assets. More and more of our lives are now conducted online. Bank accounts, social media, photos, online businesses and cryptocurrencies are not included in household assets by your Will. You’ll need to provide a tech-savvy person with information on your accounts, create an inventory and allow that person (your Executor) to handle digital assets with provisions placed in your Will.
Trying to do it yourself. Creating an estate plan without the help of an experienced estate planning attorney is asking for trouble. Here is just one example: A family thought it was a good idea to retitle the house to Joint Tenancy with Right of Survivorship between the parent and an adult child. They didn’t know about the child’s serious debt situation. The child now had an asset, and creditors moved swiftly to put a lien on the house. The family eventually lost the house to the creditors.
Reference: Microsoft Start Money (June 23, 2024) “Seven Estate Planning Mistakes You Can’t Afford To Make”
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