Your estate may be large or small, your portfolio may be thick or thin, and your assets may be abundant or sparse, but no matter your situation, estate planning is for you.
Many people put off procuring a will and/or trust because they are either confused, content with their current situation, or are scared because it makes them confront the end of their life. While we are all entitled to our decisions, putting off the creation of such important documents can be a detriment to our loved ones if we wait too long.
Wills and trusts offer different benefits, but for complete protection of certain estates, both documents are a necessity. Whether you have completed or want to create a will, revocable living trust, or both, be sure to avoid or modify your plan against these five blunders.
1. Poor planning
This blunder seems very vague, but does your estate plan cover all the bases? Trusts don’t allow you to assign a guardian for your children. A last will goes into effect at the time of death, while a revocable living trust can be modified at soon as it’s signed. Also, a will is required the go through the long and sometimes expensive probate process to assign assets legally.
Also, you must consider preparations for long term care by looking into short term disability and long term care insurance.
2. Failing to update when necessary
Life is all about events and surprises; some good and some bad. These events can include the birth of a child or grandchild, divorce, or death of a family member or close friend. If this happens, you may need to update your beneficiary designations. When investing, many people say to “set it and forget it.” That’s not the case with estate planning.
3. Not preparing for estate taxes
Alabama does not have a state estate tax, but you would have to face a federal estate tax if your estate meets or exceeds $11.58 million as an individual or $23.16 million as a married couple.
Other preparations include assigning guardianship for your children in case you pass away or become incapable of caring for them, choosing a medial proxy, durable power of attorney, and preparing for minimizing the impact of income taxes on yourself and your beneficiaries.