Owning an estate does not mean being the owner of vast land or a massive property. Everything under your ownership— from car to home and furniture to a savings account— is part of your estate. Estate planning is about delegating the things you own after your death to the people and entities you care about the most. Family, charities, friends, even pets need this crucial document without mistakes and ambiguities to ensure no disputes occur at the time of asset distribution.
The future is never certain, so a level of planning for unforeseen events is always a good idea. When it comes to estate planning, individuals use it to arrange the management of assets during their lives in the event of incapacitation or death so their wealth can be transferred to loved ones.
As the family’s patriarch or matriarch, planning for your family’s prosperity is probably top of mind – as it should be. While adult children likely will not need financial assistance once you pass on, making sure they are not left with a financial burden is essential.
In some cases, a person has plans to donate part of their estate to a charity. It may be preferable for tax purposes to leave assets for a charity or non-profit in a Traditional IRA.
You can never plan far enough ahead to anticipate an illness. However, suppose you know your health could significantly decline. In that case, you should draft documentation such as a financial power of attorney to appoint someone you trust to make financial decisions when you cannot.
One of the lesser-known reasons for estate planning includes minimizing delays, losing privacy, and expenses during the probate process.
Estate planning can be complicated, so errors can easily occur. Make sure you avoid these common mistakes:
Many people leave everything on their estate planning attorneys and are not actively involved during the planning process. Many times, they sign the plan without sifting through and understanding its provisions and clauses. Know what you are signing and check that your wishes are clearly understood.
You may not realize that there are some assets solely in your name and others you share with spouses, children, or friends. The ownership of these assets should be re-evaluated before finalizing your estate plan. Without updating and changing (where needed) the ownership of your assets, you might make it difficult for your successors to inherit them.
Beneficiary designations for different asset forms override the will. For instance, if the beneficiary form of your vehicle has your ex-spouse’s name, it will go to them even if you nominate your children as beneficiaries in the will. Therefore, make sure beneficiary designations in your estate plan are updated and in line with your will.
A living or revocable trust allows people to avoid probate and keep investment management flexible. It also helps with disability planning and readily passes on to beneficiaries upon the trust owner’s death. However, many people fail to fund (or transfer all the assets) to the trust. A poorly planned revocable trust can subject your assets to the probate process.
Without assigning the right trust or individual (defined exactly with legal jargon), you might not be able to retain tax deferrals on an individual retirement account and other retirement plans.
You must legally name two powers of attorney in your estate plan to take care of your financial and medical matters. These authorizations should be updated regularly so the right people can take care of your will and estate if you become incapacitated.
An estate plan should be re-examined and updated accordingly after every major life-changing event within your family (marriage, divorce, death, birth, and change in net worth or residence). Not updating the estate plan considering these events can render it outmoded by the time it goes into effect.
Peak American Financial Group has been serving retirees and those near retirement age with expert financial help since 1994. Our team of experienced, courteous, and receptive advisors can also help you with your estate plan. Contact us today to find out how we can assist you with your financial needs.