Most of us make mistakes. They vary in importance and for the most part can be corrected before any real damage has been done. With estate planning we find that mistakes vary based on our client’s planning objectives, which vary with changes in their lives, the lives of their loved ones and changes in their assets. Many tell us that they have a plan but often those plans are not comprehensively designed to take care of themselves during life, during disability and their survivors after their death.
With proper planning, the following mistakes can be avoided:
- No Plan, Wrong Plan or Outdated Plan. 90 percent of Americans either have no plan at all, the wrong plan or an outdated plan. Only 10 percent have a proper and current estate plan. Most plans may be outdated because of changes in their life or for lack of plan maintenance. Most Americans rely on their State laws to provide a default plan.
- No Disability Plan. Many believe planning is merely the post-death distribution of property. A plan should deal with a possible incapacity, otherwise privacy can be invaded, assets lost or stolen and personal choices not honored.
- No “Babysitters.” Parents typically fail to legally appoint or provide instructions for the guardians (i.e. “babysitters”) for minor children in the event both parents die.
- No Inheritance Protection. No one values a dollar like the person who earned it. Period. Hard-earned assets are wasted and lost by heirs to greedy and selfish people (which may include the heirs). Sometimes hard earned assets are lost by heirs out of ignorance or the application of default state and federal law.
- Improper Estate Tax Planning. Everyone can protect a good portion of their assets from estate (“death”) taxes through proper planning. If tax planning is not properly implemented, the IRS will get a significant portion of your estate.
- Improper Planning For Life Insurance. Many times, people unintentionally make the IRS the beneficiary of half of their life insurance. Nothing like paying full price for half of an asset!
- No Probate Avoidance Planning For Multi-State Real Estate. Owning real estate in multiple states guarantees added expense and delay in distribution of your estate without proper planning.
- No Income Or Estate Tax Planning For Retirement Plans. For most people, the retirement plan represents a significant portion of wealth. If improperly planned, most of the value in the retirement plan can be soaked up in income and estate taxes.
- No Business Succession Planning. Generally, a very small percentage of family businesses survive in the second generation partly because business owners concentrate on the business and not the eventual transfer of the business.
- Accidental Disinheritance. Is your family a blended family? Do you or your spouse have children from prior relationships? Chances are you will accidently disinherit your children.
In order to discover how you can avoid the top ten estate planning mistakes, schedule a meeting with a qualified estate planning attorney to learn more about your options, opportunities and the benefits of lifetime and legacy planning.