7 Ways We Can Mess Up an Estate Plan
1. Not having a plan: While there is a chance that your state’s intestacy laws will distribute your assets as you would have intended, it is not likely. Even a simple plan that covers your basic probate assets is better than no plan at all.
2. Online or DIY wills: Internet sites compiles separate documents that may not combine to make a proper plan for your assets. Additionally, these internet sites are not always tailored to the specific requirements in your state to create a valid will.
3. Not reviewing beneficiary designations and titling of assets: Regardless of what your will says, beneficiary designations and title of assets ultimately control the distribution of non-probate assets such as investment accounts, or life insurance plans. Be sure to keep your named beneficiaries and titled assets current according to your wishes.
4. Failing to consider the estate and gift tax consequences of life insurance: Many people fail to consider how to own, control, and individualize a life insurance plan according to family dynamics, net worth, and financial/liquidity position. It might be wise to work with a financial planner to decide which policy best suits your needs and how you can possibly avoid life insurance proceeds from being included in your estate when you die.
5. Maximizing annual gifts: Making annual exclusion gifts every year to family members is smart planning, and if you can leverage these annual gifts into larger sums being transferred out of your estate, you are even better off.
6. Failing to take advantage of the 2012 estate tax exemption: The lifetime estate tax exemption is the highest it has ever been since the estate tax was established. Wealthy individuals would be wise to take advantage of this large amount while it still exists in 2012.
7. Leaving assets outright to children: Leaving assets to your children in trusts as opposed to outright transfer of those assets may be wise considering divorce rates and lack of legal capacity or maturity.
See Rob Clarfeld, 7 Major Errors in Estate Planning, Forbes, Apr. 25, 2012.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.