The Don’ts of the Estate Planning – Common Mistakes to Avoid
From this, it is quite easy to understand why thinking about a future where you’re not likely in the picture is overwhelming and confusing. You have to come up with a plan for how your assets will be distributed among your loved ones, which can be difficult based on your knowledge of the subject.
Estate planning in Long Island requires careful consideration and an expert’s insights. Without it, people tend to make ill-informed decisions. In other words, they make estate planning mistakes that could have been easily avoided.
To ensure you don’t fall victim to the trap of preventable estate planning mistakes, here are the most common ones to be mindful of:
Neglecting estate planning as a necessity
The Reggae King, Bob Marley, is a cautionary tale about the importance of estate planning. Three decades had passed since his tragic death and his children were still fighting Marley’s estate in court. Why; you ask? Because the singer left behind no will or trust.
This should be enough to convince you of prioritizing estate planning in Long Island. We understand that the idea of death is not a pleasant one, but it is inevitable for every living being. With estate planning, you can make things easier for your loved ones.
Taking the DIY route
If you are clueless about taxes, would you trust yourself to figure out complicated tax returns? No, you would instead go to an accountant who’s worth their salt in taxes. Similarly, an estate planning lawyer in Long Island will simplify the process so you don’t get overwhelmed and make wrong decisions.
They’ll strategize the plan, based on your estate and personal circumstances, advising you on legal ramifications, tax details, etc.Not updating the estate plan
Births, deaths, marriages, divorces, financial losses, acquisition of property, etc., are all part of life. These big life milestones need to be reflected in the estate plan as it would change how your assets are distributed.
Heath Ledger failed to update his will before his untimely and unfortunate death. The will he has in place was before his and Michelle William’s daughter was born. As a result, his estate was left to his parents and sisters, creating quite a lot of controversy.
Failure to fund the estate
A trust is a versatile tool used for estate planning in Long Island. However, you need to fund it with assets and change record titles or beneficiary designations so your estate is properly distributed while you’re still alive. Failure to fund the trust will result in your estate going through the probate process.
Michael Jackson’s estate ended up going through a series of court battles even though he had a trust in place. The mistake was not funding it properly.
Not planning for your own disability
Life doesn’t guarantee anything. There are unfortunate instances that may leave you unable to make decisions you would have made otherwise. Unexpected or long-term physical or mental disability is one instance that can leave you unable to make financial and medical decisions.
An estate plan appoints a power of attorney or names a trustee who can make the decisions on your behalf, as per your instructions mentioned in the documents.
Not reducing estate taxes with gifts
Making gifts under your estate plan is a way you can reduce estate taxes. In the US, the Internal Revenue Code allows gifts up to $14,000/year/spouse may be excluded from estate tax. This will leave more money for distribution.
Failure to take tax considerations into account
This covers several estate tax aspects, such as:
- Putting your child’s name on a deed for an estate worth more than $14,000. This leaves them with a sizeable tax gift. Instead, passing down estate via inheritance is better.
- Not transferring life insurance policies to a trust. These policies are subject to estate tax cuts, which mainly go to the IRS. A life insurance trust can spare your beneficiaries from the hefty taxes.
- Your estate may be subject to federal income tax liabilities. Failure to consider this fact can reduce what your beneficiaries end up with. Consulting with an estate planning lawyer in Long Island can resolve that.
Choosing the wrong representative or executor
Choosing a trustee or executor requires a lot of self-reflection and thinking over. The mistake people make is choosing a close friend or family member to do it. For some, this works, but in cases where disagreement is a possibility, it is not the best idea.A third-party with an objective opinion just makes more sense. An estate planning lawyer or professional executor will be impartial and stick to how you set out the estate plan to be.Talk to a lawyer to learn more
While the abovementioned mistakes are some of the most prominent ones, there are many small, technical details that can go wrong. An estate planning lawyer in Long Island will be in a much better position to help you avoid them. Also, they will ensure your estate plan covers all the bases so your family and loves ones aren’t burdened further.
