The current state of the economy has reinforced the need to use smart judgment when it comes to handling money. Many people are saving and investing wisely to ensure their families will have the care and support they need. What some may not realize is that they may be sabotaging all of their hard work by making errors in their estate plan. People in New York and across the U.S should be aware of some of the typical estate plan errors and how to avoid them.
Having No Plan
Perhaps the most typical estate planning error people commit is failing to plan at all. Some avoid the task because of an unwillingness to contemplate their own mortality. Others mistakenly believe that estate planning is only for the very wealthy and that those who have more modest estates do not need to bother with the task.
However, if a person does not make an estate plan, the intestacy laws of whichever state a person resided in at death will determine how that person’s assets are distributed. The laws usually give relatives percentages of a person’s assets, but it is rarely the case that the way the law allocates the assets is the same way a person would have done it, had he or she made an estate plan.
Estate plans are not just about money. A complete estate plan should also include provisions naming guardians for minor children and advanced health care directives. Establishing end-of-life planning can saved loved ones the stress and anguish of attempting to figure out medical treatment in the event
Not Reducing Assets
Advanced planning can also reduce the tax burden for large estates. A number of strategies exist to reduce estate assets, such as setting up trusts, opening joint accounts, purchasing life insurance policies and establishing accounts with Payable on Death registrations.
People can also pass along assets while they are alive in an effort to reduce their taxable estates by taking advantage of the gift tax exemption and tax-free transfers for medical and education expenses.
Not Reviewing an Estate Plan
Some people think that once they have created their estate plans they need never look at them again. However, people need to update their estate plans regularly to ensure that the plans still reflect their wishes for their assets as their lives change. Major life events such as marriage, divorce, birth of a child or death of a spouse call for estate plan reviews.
Not Using an Attorney
A number of websites and books offer forms that allow people to write their wills without using an attorney. Estate planning can be a complex process, however, and merely having the forms is insufficient to ensure that an estate plan takes advantage of all the tools and benefits available based on an individual’s circumstances. Additionally, these forms do not help people understand tax laws or alert people to changes in tax laws.
People looking to create estate plans or update existing estate plans should contact an experienced estate planning attorney.