If you or a close family member is starting to look into estate planning, you’ll likely be eager to understand some of the common pitfalls. Many people start to plan their estate with a very naive perspective, and this can lead to less-than-optimal strategies that may be costly to modify further down the line.
The following are some of the most common estate planning mistakes made by those who are drafting their will or creating trusts. By being aware of these mistakes, you’ll be able to avoid them going forward.
Forgetting to make gifts to reduce estate tax
Lowering the value of your estate during your lifetime can reduce the amount of tax that the estate will need to pay at the end of your life. The Internal Revenue Code allows for gifts up to $14,000 a year per spouse to be made. By making these gifts to those you have named as beneficiaries, you’ll potentially be able to maximize the total amount of inheritance they will gain.
Not updating your will regularly
It’s important to make a will early in your life. But situations change, and your will should change accordingly. Sadly, many estates are contested and people’s last wishes are often not fulfilled because they failed to update their will during their lifetime.
Not planning for disability or incapacity
How you would like to be treated and cared for in the event of disability and incapacity can also be managed as part of your estate plan. It’s possible for you to appoint a power of attorney who would be able to make medical or financial decisions on your behalf if you were to become incapacitated. You can also use a will to specify preferences regarding medical care decisions.
Failing to take action
Many people want to avoid the potentially unpleasant emotions that come with planning for the end of their life. As a result, they fail to put in place an adequate estate plan. The truth is that planning your estate can be a life-affirming action that solidifies the positive legacy that you will leave.
If you are starting the plan your estate, make sure that you have put in place strategies that are optimal for your situation.