One out of every 700 deaths results in paying federal estate taxes. While this is a small fraction of the US population, it isn’t the only source of end-of-life expenses. If you want to know how to avoid high pay-outs, learn about these five common mistakes.
1. Taking the DIY Approach
With so many resources online, it’s tempting to think you can do your own estate planning. This is not an intelligent approach and can end up costing you thousands. Your final wishes could not be carried out because your will doesn’t satisfy the requirements outlined by Florida law. A lawyer makes it their career to know the law and can advise the best course of action for your particular financial and life situation. They can suggest solutions that will best work for your situation that you may not be aware of.
2. Not Updating Your Estate Plan
Life is not stagnant, and neither should be your estate planning documents. This is not a set it and forget it type of legal task. Every five years, you need to check your documents and ensure they match your current living situation. You could get married, divorced, have children, or acquire high-value assets. The laws could change, and your current setup isn’t the best option for what you want to have happen with your estate.
You need to do more than just update your will. You also need to update the rest of your retirement accounts. For example, if you have beneficiaries named for your IRA, 401(k), and life insurance policy, you need to update these people. Otherwise, the ex-spouse you had a falling out with will still inherit as the named beneficiary, despite decades of no contact.
3. Not Creating and Funding a Living Trust
Creating and funding a living trust can help you avoid your estate going through probate, which can be a lengthy and expensive process. However, it isn’t enough to create the trust. You also need to fund it. Your attorney will help you transfer ownership of your assets from your name to the trust. If you acquire assets later on that you want to be a part of the trust, you will have to actively add them. Any assets that you do not transfer title to will go through probate.
4. Failing to Plan for Long Term Care
You may feel healthy now, but there is no way to predict how your health will be ten or twenty years from now. Long-term care is expensive and, without proper planning for it, can wipe out your assets and estate. One option is to purchase long-term care insurance or protect certain assets by placing them in a trust. Otherwise, you risk all of your assets disappearing and your heirs receiving nothing.
5. Not Communicating With Family
No one wants to have tough conversations or think about a time when their loved ones are no longer here. However, it’s essential to speak with your friends and family about what you want. The more open you are about your wishes, the better people will understand what you want. Set their expectations about how you plan to distribute your estate. This can help to reduce the risk of people contesting the will or fighting with each other over the proper management of your estate.
6. Naming Your Children as Joint Owners
One estate planning approach people take is to name their children as joint owners of their assets. The hope is that upon passing, the children become the sole owner without having to go through the expense of probate. Unfortunately, this is a huge mistake due to a lack of understanding of the law.
When you name your children joint owners, your children’s creditors have access to your assets. This goes beyond just standard lenders or mortgage companies. For example, a personal injury lawsuit from a car accident can completely wipe out your assets.
A better approach is to give your children power of attorney and payable-on-death beneficiaries. This accomplishes the same goal while also protecting your assets.
Prepare Your Estate Planning Documents
Preparing and managing your estate plan documents ensures that everything is in order. Not only will you save money by avoiding unnecessary expenses, but you can feel confident that your loved ones are taken care of. The first step is scheduling an appointment with an experienced Florida estate planning attorney to discuss your current situation and end of life goals.
Schedule a consultation today and let our estate planning attorneys show you how to avoid high pay-outs.
