An estate plan is an essential part of your financial and temporal well-being and future. Some people mistakenly think that they don't need a will or any sort of trust if they don’t have many assets or if they are still young, but that is incorrect. Even after they have a financial and life plan in place, people can still make mistakes when it comes to estate planning.
If you've already started the planning process, here are some common mistakes and how you can avoid them.
Setting and Forgetting
After you meet with your lawyer and set a good plan for yourself and your family that deals with your current assets, you may experience peace of mind and move on. However, simply setting and forgetting your plan can be a mistake because, as life goes on, your finances and your family's needs can change.
You should make it a point to review your estate plan with your attorney regularly, but it's especially important to go over your plan in the following circumstances:
- You get divorced or remarried. You'll want to adapt the plan to include new beneficiaries or to remove old ones.
- You experience the death of a spouse. In the case of a spouse passing, you'll want to change the plan to direct how you would like the assets divided following your own death and to provide for your own needs now that you've lost income and companionship from a partner.
- You adopt or welcome a new child. After the birth of new children, you may have specific bequests to make on their behalf.
- Your health changes. You might want to add additional provisions for your care if you develop a condition that requires additional medical attention.
- You have a job change or a significant change in assets. If you acquire a new property, you'll want to account for that in your estate plan.
It's tough when you've set a plan and need to use it ten years later, only to find that tax laws might have changed, that the plan is not complete, or that you have unprotected heirs. Avoid this trouble be staying on top of your plan and knowing what it includes.
Limiting Your Plan
Some people limit their estate plan to deal with financial assets alone. However, a complete estate plan takes other eventualities into account. For example, an well-rounded plan will make provisions for your funeral plans, including paying for final wishes and for burial.
Other aspects of good estate planning include making sure you know how you'll handle disability, making an advance directive for medical care, and deciding to create a living will or power of attorney should you be unable to make legal choices.
Underestimating the Power of Gifts
Gifts can have a big impact on how much of your estate is taxed or not taxed. For example, it can be a huge mistake to leave your home’s deed to your children, because they will have to pay taxes on the value of this asset. Instead, you might want to leave your home to a trust and then have the trustee manage the asset from there.
On the other hand, keeping all of your wealth close can also make it easier to tax your estate after death. if you make small gifts to family over the course of several years, you can do more to hold onto your money without a large chunk being eaten up by probate or estate taxes.
If you take steps to make sure your estate plan doesn't go stale before it goes into action, you'll be better prepared for the future. For more information on estate planning, contact us at The Law Office of Leon A. Karjola.