Most people don’t think of themselves as having an “estate”. Most people think of an “estate” as mansion on a hill, with the multi-millionaire living inside. This is inaccurate thinking. If you own anything, you have an estate. And if you don’t set things up right while you’re still with us, your family could get hurt. Beware of these most common and expensive estate planning mistakes.
Not having wills, living wills, powers-of-attorney, living trusts, etc. I would be safe in saying the vast majority of people coming in here do not have anything close to a proper set of estate planning documents. Many don’t have simple wills, which is the first document you need. Then, we see people who don’t have documents like living wills that spell out how you want your health care administered should you become terminally ill, for example. Or who would handle your legal and financial affairs if you became mentally incapacitated? Or who you want in charge of your money if you don’t want your spouse or kids to handle it themselves if you’re very ill or dead? These issues are very serious, and not having these documents in place can be a disaster. I’ve seen these nightmares happen so many times, I know what I’m talking about.
Updating your wills to make sure they reflect your present life situation. We see so many people who haven’t had their wills reviewed in years…which, if somebody died, would cause huge problems. For example, we see people who’ve still named spouses in their will they are no longer married to. Or guardians for their kids who they haven’t spoken to in years. Or omitting kids who weren’t born when the wills were drawn up. Or having provisions that don’t apply in our state because the will were drawn in another state before they moved here. And so on.
Forgetting that a guardian for your kids is a major consideration. If you and/or your spouse were to pass away…who’d get your kids, and how would they have money to take care of them? Most people don’t pay much attention to this, but if you don’t set this up NOW, a judge, or worse, some family member you don’t like can make the decision for you!
Underestimating the size of your estate. Many people who don’t feel rich, have assets that will put them well over the amount that can be subject to estate or gift tax. People forget the value of their homes, or retirement plans, or collections, and so on. Be sure to take a realistic count of ALL your assets when drawing up an estate plan, so you don’t end up getting screwed by needless estate taxes.
Thinking a revocable living trust will save income and/or estate taxes. These trusts can perform a valuable function by assuring professional management of your assets if you become disabled, and by letting your assets avoid probate when you die. But in and of themselves, they do not reduce income and/or estate taxes.
Leaving everything to a spouse. You and your spouse each have a personal estate tax credit that can prevent estate taxes from ever being paid. If you leave everything to your spouse, you’ll lose the benefit of your credit and the assets will be taxed when your spouse dies. If assets exceed certain amounts (which change each year, and are likely to change as Congress keeps back-peddling on estate tax law) you may be better off setting up separate bequests through trusts to use your maximum credit.
Bottom line. Please get your estate planning in order NOW! Take a look at what you have in place, if anything, and then we can help you work with an attorney to get yourself up-to-date on your estate planning issues!
*** WARNING! DO NOT DO ESTATE PLANNING ON YOUR OWN OR FROM READING SOMETHING! YOU MUST HAVE AN EXPERIENCED ESTATE PLANNING ATTORNEY EXPLAIN YOUR OPTIONS AND HELP YOU DECIDE WHAT TO DO!
As usual, with any financial issue like this, we’ll be glad to work with you on determining if any of these strategies will work for you and your family! Please keep in mind that this tip is designed to be of help for you, but is not to be relied upon as advice. It is merely a reminder that there are many choices you have available to you, and that planning is the only way to find the right answers for your situation!
As with any financial issues, make sure you get the right information before making a decision! If you have any questions, we’ll be glad to help you!