According to NextAvenue.org, an executor is typically charged with more than 100 tasks to address when settling an estate. With all these moving parts, it’s easy for you to forget something important when initially creating your estate planning documents. Plus, what’s needed can evolve when a relevant law changes (as it did when SECURE — the Setting Every Community Up for Retirement Enhancement—was passed into law in 2019) — so even people who fully complete legal documents may need to review theirs again.
To help, here are foundational items to consider and common estate planning mistakes to avoid.
Estate Planning Basics
Professionals who can help you, Fidelity.com shares, include an estate planning attorney and perhaps a tax adviser. They can help you create a last will and testament, plus financial and healthcare powers of attorney, as well as living wills and perhaps a revocable living trust. The living will legal document allows you to list end-of-life wishes to be considered if you can’t express them yourself.
Advice given by these professionals can help you to maximize what you can leave your beneficiaries while minimizing estate tax owed.
Have you organized what you need for your medical care? Do you have a long-term care plan in place? Do you have enough life insurance? What else needs completing for your retirement plan? Do you need to further fund your retirement accounts?
Avoiding Common Estate Planning Mistakes
Now, here are several items to doublecheck in the estate planning documents you’ve created. First, is your last will and testament current? If, for example, you’ve left a piece of property to family members — but no longer own that home — then your will should be updated. Make sure your will has enough detail, too, including breaking out individual items of significant value, meaning both financial value and those with sentimental value.
Are you sure that your will is written in a way that’s legally binding in your state? What’s true in one isn’t necessarily so in another.
Have you moved?
It can’t hurt to review your beneficiary designations (including contingent beneficiary designations). The SECURE Act mentioned above has altered how these funds would be managed when it’s time for someone to inherit money from an estate. Plus, if you don’t review your beneficiary designations, you could — as just one example — end up leaving your hard-earned money to an ex-spouse.
Forbes.com lists additional mistakes to avoid. Let’s say you’ve decided to create a revocable living trust, so your assets can surpass the need for probate. Make sure the trust is then funded. What can happen is that people have an estate planning attorney create a revocable living trust agreement; it’s reviewed, tweaked, and then finally signed by all relevant parties. But — and this is a big but — if the legal title to assets that should be in the trust aren’t appropriately transferred over, then you’ve wasted your money on the legal documents. Plus, the benefits you thought your beneficiaries would have won’t transpire.
Some assets are easy to transfer over, but transferring real estate, for example, is more complex, and so are the transfers of bank accounts.
Finally, FindLaw.com shares more common estate planning mistakes to avoid.
Rather than putting a child on the deed of your real estate, for example, make it part of your estate plan that he or she will inherit. Why? If you go the first route, you’ll also be saddling that child with a “hefty-sized taxable gift.”
Also, carefully consider who you’ve chosen as your executor. Is that really the best person? It’s natural to choose family members but, sometimes selecting someone more objective can be the better idea.
Here’s another tip: Consider making gifts under your estate plan, which would help to reduce taxes. They note that gifts up to $14,000 per year per spouse can be excluded from estate tax. Gifts made to groups, businesses and individuals can equal $28,000 in estate tax savings. This can help your estate to have more money when it comes time for distributions, and you can also help the people who receive your gifts.
There is no one right way to do estate planning, but it’s important to NOT procrastinate — and to have the right professionals on your side as you create and then regularly review your estate plan.