Despite popular belief, you do not need to be rich, elderly or sick to have an estate plan. If you have a house, car, money in the bank or cherished belongings, you can benefit from creating an estate plan. Not only can a plan help you maximize the value of your estate but also, it allows you to have a say in to whom your assets go when you pass. That said, FindLaw warns that there are certain estate planning mistakes of which you should be aware so that you can avoid making them—the first of which is not having an estate plan.
Once you devise an estate plan, review it every so often to ensure all the terms are still valid. Marriage, kids, a business, real estate and other factors that come along later in life can alter your initial plan significantly. For instance, your initial document may leave everything to your parents and your first amendment may leave everything to your spouse. However, you may want your final will to name your spouse, children and grandchildren as beneficiaries. A periodic review can help ensure you account for all your loved ones and assets.
Another mistake FindLaw warns against is not accounting for long term disability. A disability, especially one that is unexpected, can take a toll on your finances and your relationships. You can make things easier on yourself and your loved ones by appointing one person who will make healthcare decisions and one person who will take care of your finances on your behalf should you be unable to do either on your own.
FindLaw also suggests against putting your children on the deed to your home. In doing so, you are giving your child a large taxable gift. To avoid taxation on your family home, create an estate plan that allows you to pass your home to your children via an inheritance.
Speaking of gifts…Many people fail to include gifts in their estate plan. The IRS allows individuals to gift up to $14,000 tax-free. Take advantage of this allowance to reduce the amount of taxes your loved ones will have to pay on your estate.
Another mistake individuals make is failing to utilize a life insurance trust. When you die, your life insurance policy will be subject to a sizeable estate tax, which means your beneficiaries get less of the money you put aside specifically for them. A life insurance trust can help you avoid this tax by acting as the owner of the policy.