Estate planning is very important. However, most people are quite unaware of the processes involved and how to go about it in general. It’s understandable though, as people don’t like to think about their own death and what would happen to their families after that.
However, estate planning is really one of the most important financial and legal tasks that have to be taken care of while you are alive and well. By having your wishes formalized this way, you can be assured that asset distribution after your death will go smoothly without any contests between beneficiaries.
Since most people know so little about estate planning, there are quite a number of common mistakes they make. So, to help you out, here are the most common estate planning mistakes. Recognize them, understand them, and avoid them. They will help you save a ton of money on unnecessary estate taxes as well as probate fees.
- Thinking only the wealthy need an estate plan
The first major blunder is assuming that you probably don’t need an estate plan since you’re not a millionaire. The truth is that estate planning is not just for the wealthy, contrary to what many people have grown to believe. It is for anyone who wants to leave whatever assets they have in the right hands so their family and loved ones will be provided for.
Regardless of your net worth, if you are 18 years old or older, it’s best to have an estate plan. By clearly mentioning your wishes, you can decide what is best for your family after you are gone, instead of leaving everything to the state.
- No regular update of your will
Your family will most probably undergo many changes before your death. For example, even though divorces, illnesses, bankruptcy, and so on are what no one would wish upon their families, they are still possibilities. And just the fact that they are possibilities should be enough reason to take necessary precaution.
One of the best ways to ensure that your assets will be left to the people you intended is by updating your will on a regular basis. Every time such changes take place within your family or even business, make sure to change your will too.
- Not taking steps to minimize estate taxes
If the worth of your estate is more than $10 million, then the dreaded estate taxes will likely have to be paid. One important point to remember that with time, your estate will grow too. As of now, it may not be over $10 million, but if it is close, then chances are it will soon hit the mark within a few years.
Estate taxes are hefty and can significantly reduce the amount your heirs inherit. So, make sure you create an estate plan with tax planning provisions. For example, making gifts is a great way to reduce estate taxes. As per the Internal Revenue Code, you and your spouse can each gift up to $15,000 per year.
Posted in: Estate Planning