Avoid most common estate planning mistakes with these three tips
Estate plans can be strengthened with these three tips.
Estate planning is a term that covers many different legal options. It can include putting together a will to outline the distribution of assets as well as various health care and financial documents to provide guidance in the event of incapacitation. Those who are considering an estate plan can increase the chances of putting together a plan that meets their wishes by following these steps:
- Plan. The first and most common mistake is not having any form of estate plan in place. The American Bar Association, a group of legal professionals from throughout the country, notes that approximately 55 percent of Americans do not have a will or estate plan. This generally means the laws of the state determine how property is distributed. Proper planning not only helps to better ensure assets are distributed in line with the creator’s wishes, but can also reduce the amount that is spent on taxes, increasing the assets that go to family members, loved ones and chosen charitable organizations. Some documents that may be utilized in a plan include wills, trusts, powers of attorney documents, health care proxies and advanced medical directives. For those with young children, guardianship and conservatorships may also be included.
- Communicate. It may seem obvious, but communicating how assets will be distributed to loved ones and family members can help reduce tension and discord during the distribution process. Another common mistake, noted in a recent article by MainStreet.com, a website designed to providing personal finance tips and advice to help readers grow their wealth, is failing to account for sibling rivalries. An unequal distribution amongst family members may be viewed as a surprise. Surprises at this time can lead to costly disputes and potential litigation, questioning the validity of the plan. Openly communicating how assets will be split can help mitigate any potential courtroom battle. If the creator is uncomfortable having these conversations, a letter included with the estate planning explaining the distribution can also help.
- Update. It is important to update an estate plan on a regular basis. A good rule is to revise the plan at least once every five years. However, the plan should also be revisited with every major life event. This includes the death or birth of family members as well as divorces and weddings. Major changes in the law or in health status should also trigger a review.
These are just a few of the steps that can be taken to help better ensure an estate plan meets your needs. Putting together a plan can involve a variety of legal documents and, as noted above, steps can be taken to reduce the tax obligations assigned to the estate when the assets are transferred. Contact an experienced estate planning lawyer to discuss these options. This legal professional will review your estate and work with you to design a plan that meets your unique needs.
Keywords: estate planning