Planning an estate is not a solely a recommendation for the wealthy. The majority of Americans will have assets they wish would remain with their friends and family after they pass. Of course, not all assets refer to items, some individuals may have cash or shares of a company they wish to leave behind. Creating an estate plan may help your loved ones avoid a potentially difficult probate process with the courts. Whenever addressing legal matters, it is advised to seek the opinion and expertise of professional. However, below are some general mistakes to evade.
Not Transferring Your Life Insurance Policies to a Life Insurance Trust
After you die, your life insurance policy is affected by an estate tax. Therefore, part of your money goes to the government rather than to your offspring or beneficiaries. If you develop a life insurance trust, you may avoid an estate tax and provide your family with reduced waiting time for the insurance payout.
Not Planning for Disabilities
Unfortunately, life altering accidents can occur and result in a disability. A disability could you leave in an incapacitated state, unable to care for your children or even unable to communicate. A scenario like this could harm your family and finances. By designating a legal caretaker, you can live with the comfort knowing that, should an accident occur, your children’s fate will not be decided by the courts or social services system. You may also designate beneficiaries of your estate and an executor to carry out decisions pertaining to your health; the executor may be critical in making medical decision on your behalf should you be left in a state where you are unable to do so. These are all recommended decisions to be made in case such a tragic event should occur.
Not Making Gifts
Making gifts is a great way to reduce your estate taxes. Not many people take advantage of this exception although it is quite useful. The Internal Revenue Service (IRS) allows each spouse to gift an amount up to $14,000 per year that can be deducted from their estate tax.
Not Making Use of a Spouse’s Federal Exemption
If you are married, you may take advantage of a federal exemption of $675,000 to save on estate taxes. If your spouse dies, a small part of an estate will be put into an exemption trust, or credit shelter trust.
Choosing the Wrong Individual to Handle Your Affairs
A death in the family may make it difficult on every member involved, especially your immediate family. Though your spouse or oldest child may appear to be the best individuals to handle your affairs, they may be too grief-stricken to do so effectively. A trusted friend or member of the family or that is a bit more distant can be a more fitting trustee, if only to provide your family with some room to grieve.
Naming Heirs on the Deed to Your House
This is actually a bad idea. If you put your child’s name on the deed of your home, you are actually saddling them with many taxes. Some states include gifts over a certain monetary amount is included in estate taxes. The help of a professional estate planner will help you leave your plan with minimal estate taxes.
If you are struggling to plan your estate, considering hiring a professional estate planning attorney. Estate planning attorneys are familiar with many different components of estate plans as was as laws regarding them. An experienced estate attorney O’Fallen, MO trusts may be able to help you formulate a plan you can be secure and confident about.
Thank you to our friends and contributors at the Legacy Law Center for their insight into estate planning.