Even when you know you need an estate plan, you may be unsure where to start. Understanding the common mistakes that arise during this process can remove some of the confusion.
Get ready for estate planning by learning about the pitfalls to avoid.
Not updating your will
If you have an old will, you have not done enough to plan your estate. You should review this document every year or two and revise when necessary. In addition, revisit your will in the face of family changes such as marriage, birth, death and divorce. If you buy significant property or acquire a business, your will must account for those new assets as well.
Not budgeting for long-term care
Most Americans eventually need long-term health care, whether that comes in the form of home care or a live-in nursing facility. A comprehensive estate plan should budget for these costs while accounting for both state and federal Medicare rules.
In addition to determining how to fund long-term care, you should document your wishes for health care in case you can no longer make these decisions independently. With a health care power of attorney, you can appoint a friend or family member to act on your behalf and make sure the health care team carries out your wishes for end-of-life care.
Not funding a trust
If you think about opening a trust to protect assets, avoid probate or decrease estate taxes, make sure you transfer the property in question to the ownership of the trust. Forgetting this step means that even though you created a trust, you still personally hold the title for the assets.
Paying too much estate tax
Tax-free gifts reduce the estate tax your beneficiaries will pay. For 2020, every individual can give $11.58 million in tax-exempt funds to any organization, individual or business.
Although many people think that a will-in-a-box program will suffice, professional advice ensures that you protect future generations and document your final wishes.