You don’t have to be extremely wealthy to plan your estate. It is a common misconception that only wealthy and famous people must go through this process before they pass, but you should as well if you have any items of value like your bank account, car or home. Having an estate plan can benefit you by handling your assets and possibly increasing the profitability of your estate as well. It is always best to consult a professional when dealing with legal matters. Since it is difficult to avoid errors if you are planning your estate by yourself, here is a list of common mistakes to avoid.
- No Estate Plan
This is the number one mistake you can make! Setting up an estate plan before your passing can ensure your assets are properly distributed to your heirs and that there is no confusion regarding your final wishes.
You don’t want to wait too long to plan your estate. Meet with an estate planning lawyer Sacramento CA trusts as soon as possible.
- Naming Heirs on the Deed to Your House
This is actually a bad idea. If you put your child’s name on the deed of your home, you are actually saddling them with many taxes. Some states include gifts over a certain monetary amount is included in estate taxes. The help of a professional estate planner will help you leave your plan with minimal estate taxes.
- Choosing the Incorrect Person to Handle Your Affairs
A death in the family can make it hard on every member involved, particularly your immediate family. It seems only right that your spouse or eldest child will handle your affairs when you pass, but they may be too grief-stricken to take on the task. A member of the family or trusted friend that is a bit more distant could be a more fitting trustee, if only to give your family some room to grieve.
- Not Referring to a Tax Professional
You can avoid making this mistake by simply scheduling a consultation with a tax attorney while planning your estate. They can help you navigate the difficult world of taxes by providing you with systems to meet your estate’s needs without leaving behind a financial mess for your heirs.
- Not Making Use of a Spouse’s Federal Exemption
If you are married, you may take advantage of a federal exemption of $675,000 to save on estate taxes. If your spouse dies, a small part of an estate will be put into an exemption trust, or credit shelter trust.
- Not Making Gifts
Making gifts is a great way to reduce your estate taxes. Not many people take advantage of this exception although it is quite useful. The Internal Revenue Service (IRS) allows each spouse to gift an amount up to $14,000 per year that can be deducted from their estate tax.
- Not Updating Your Will When Necessary
A good time to revise your will is any time a major milestone or significant event happens. A birth, a death, divorce, the acquisition of property or money are all events that qualify. Things can change and you may want to add or remove someone from your will depending on the event.
- Not Transferring Your Life Insurance Policies to a Life Insurance Trust
After you pass on, your life insurance policy is affected by an estate tax. This means that part of your money goes to the government rather than to your heirs or beneficiaries. If you create a life insurance trust, you can avoid an estate tax and prevent your family from waiting too long for the insurance payout.
- Not Planning for Disabilities
A monumental change that can occur is a long-term injury resulting in disability. This scenario could be detrimental to your finances and family should you become incapacitated and require serious medical treatment. You should designate a caretaker for your children, decide what to do about finances and also choose someone to execute your healthcare wishes if you cannot do so. Establishing a living trust and choosing a power of attorney are important decisions to make BEFORE such a thing happens to you.
Contact Yee Law Group if you’d like to begin your estate planning process, either by filling out a quick form, or calling our office at 916-927-9001 for a free consultation.