The music icon Prince was far from the only celebrity failing to have a will, the most significant estate planning mistake of all. Tobacco heiress Dorothy Duke named her butler the executor of a $1.3 billion estate, and her family spent millions on legal costs before the estate was settled. You don’t have to be wealthy to make an expensive estate blunder, says a recent article from Microsoft Start Money, “Seven Estate Planning Mistakes You Can’t Afford To Make.” Regular people also make costly mistakes. However, they can easily be avoided by following these steps.
Procrastinating until the “right” time. Making decisions when you’re under a time constraint because of an unexpected event is not the best time to do estate planning, although it is better than neglecting to do it at all. Make your estate plan well in advance of any potential need. Leaving a mess for your children to figure out will almost always end badly. Fighting among family members, assets lost to cost battles, and unnecessary stress are just a few of the headaches. It’s not how you want to be remembered.
Not updating your estate plan. Wills are like pets—they require ongoing care. If a new child is born or adopted and your will isn’t updated, your estate plan may not function the way you desire. If you remarry and don’t update your estate plan or beneficiary designations, your new spouse will have little recourse to what you might have wanted to leave them. The same goes for major changes in your financial life, up or down.
Putting your head in the sand about taxes. In the last 15 years, there have been many tax changes. Failing to address tax changes with estate planning in mind can lead to financial disasters. Remember, you may not be near the federal estate tax threshold. However, if your state levies estate taxes or one of your beneficiaries lives in a state that levies inheritance taxes, you’ll need to plan for them.
If the lifetime estate and gift tax exemption reverts to pre-2017 tax law levels, “average” wealthy people with estates worth around $6.46 million will pay federal estate taxes. If this is or likely could be your situation, start talking with your estate planning attorney now to address this change.
Ignoring incapacity. We’re not sure which is harder to consider, incapacity or death. Neither is pleasant to consider; one is likely, and another is certain. Having the right plan in place means having the statutory durable power of attorney, medical power of attorney, health care directives, HIPAA release, guardian designations, appointment of agent to control disposition of remains, and other documents specific to your situation as part of your estate plan.
Forgetting to plan for non-cash assets. If you own a home, what do you want to have happen to the home upon your death? If you become incapacitated, who will take care of your home, your pets and any property requiring upkeep? Classic cars, antiques and art collections must be disposed of in a planned manner.
Neglecting digital assets. More and more of our lives are now conducted online. Bank accounts, social media, digital photos, online businesses and cryptocurrencies are not included in household assets by your will. You’ll need to provide a tech-savvy person with information on your accounts, create an inventory and direct the person to serve as your digital executor. You should also be sure that your will or revocable trust allows your executor to handle your digital assets.
Trying to do it yourself. Creating an estate plan without the help of an experienced estate planning attorney is asking for trouble. Here’s just one example: a family thought it was a good idea to retitle the house to Joint Tenancy with Right of Survivorship for the parent and an adult child. They didn’t know about the child’s serious debt situation. The child now had an asset, and creditors moved swiftly to put a lien on the house. The family eventually lost the house to the creditors.
Contact the Law Office of Christina Stroyick Brengel today to begin or update your estate plan.
Reference: Microsoft Start Money (June 23, 2024) “Seven Estate Planning Mistakes You Can’t Afford To Make”