We plan on having a good day, a good year, and a good life. But usually, we stop there. We often disregard planning for a good end of life, but it is important to consider how the world will continue to feel the effects of our lives when we are gone. Estate planning is a crucial step in preparing for the future.
Estate planning is the process that involves the management of your assets and the distribution of your wealth after you die. Keeping your estate planning up-to-date is important to ensure an efficient and smooth transition for those you leave behind. And while it is uncomfortable to plan for the end, all of us know that no one will live forever.
Mistakes in estate planning commonly occur because many people do not understand how their assets (real estate, bank accounts, etc.) will be distributed after they pass away. Therefore, it is extremely crucial that you have all the information on hand before finalizing any decisions regarding your estate.
So here are the common estate planning mistakes Seniors cannot afford to make:
10 Common Estate Planning Mistakes Seniors Cannot Afford To Make
- Fail To Have Real Plan In Place
Those who fail to plan for the future can find themselves without anything in place for their assets. And this can create many problems down the road. Planning is a process that requires time and effort on your part. You cannot expect your situation to change overnight, so you must have a realistic plan in place, to begin with. A good estate plan should address these issues: Who are my Trustees? Who will inherit my assets? (Spouses and children) What must be done with my assets after I die? (Include funeral arrangements, estate taxes, etc
- Failing to Update Plans With Time
While time is on your side, it can quickly speed by without you taking any action to make sure you are on the right path. Losing track of time is a common mistake that commonly occurs with those who fail to update their plans with time. Death happens to everyone, and your plan must account for this fact. Estate plans need to be updated after significant life events, when your goals change, or when public policy changes. For instance, if you transfer to a new state, you must review your estate plan. Legal instruments like wills, trusts, powers of attorney, and health care directives often need to be changed from time to time.
- Not Plan for Long-Term Care and Disability
Failing to include long-term care practices in your estate plan can be expensive for your loved ones down the road. No one plans ever to get old or disabled, but the reality is that both are common occurrences. Therefore, you must have a solid plan for both of these situations. A will is not enough when caring for yourself at home or when you travel out of state. Those who fail to plan and include long-term care provisions in their estate plan can find themselves in a significant amount of legal entanglements down the road as they depend on others to provide care for them.
- Lacking Liquidity
All of us know that the world runs on money and items of value. Having enough assets to provide for you and your family should be a top priority. Those who fail to plan for liquidity can find themselves at a disadvantage down the road. Many people often make significant financial mistakes but do not realize that they are creating a trap. It is hard to plan for the future when you are stuck with bills that require immediate attention. Therefore, it is important to have enough liquid assets in place so that you can always provide for yourself and your loved ones when life’s unexpected events occur.
- Failure to Plan for Estate Tax Liability
For many, estate tax planning is a nightmare they wish they never had to face. People finally realize the importance of estate planning after death occurs. While estate tax laws are constantly changing, one thing remains constant: death is the one thing we can be certain of. The government wants its share when it comes to inheritance, so you must be prepared with an estate tax plan to minimize any losses your beneficiaries may encounter when you pass away.
- The Improper Ownership of Assets
Another common mistake is taking an asset you held for your lifetime but never transferred over to a beneficiary. Where there is confusion about ownership, there are disputes after someone dies. You can avoid these problems by properly transferring assets between loved ones. Do not just assume that assets will be distributed where they belong–transfer them after you pass away. This includes the transfer of title on real estate and bank accounts to the proper parties (beneficiaries). Also, it is important to make sure beneficiaries have the right powers of attorney so they can access your assets with ease when the time comes.
- Not Taking Into Account The Financial Impact of Income Taxes on You and Your Beneficiaries
Proper tax planning can make an inheritance last for generations to come. However, not planning for the future can lead to significant problems. One of the common (and costly) mistakes seniors make is failing to plan how income taxes will affect their estate plans. For instance, you may be leaving a sizable inheritance behind after you pass away, but your beneficiaries may be forced to sell off all their assets in order to pay off estate taxes. You want to avoid this scenario at all costs since it will leave your beneficiaries with nothing leftover in their pocketbooks when they pass away themselves.
- No Plans In Place for Underage Children or Beneficiaries
One of the most significant goals of estate planning is to make sure your kids are cared for in the case of you or your significant other’s untimely death. You must also have a proper will in place that designates a guardian. Beyond designating a guardian, spell out instructions for how the money should support the kids. This way, the money is properly allocated for the children to meet their needs.
- Not Making Gifts to Reduce Your Estate Tax
The impact of estate taxes is felt the most by those who leave larger estates behind when they pass away. This can be curbed by making gifts to various people during your lifetime. Many people fail to make gifts while alive because they find it more difficult to part with their hard-earned money. However, there are ways to share your wealth with others without losing all control over it through gift trust, charitable giving, and family support trusts.
- Choosing The Wrong Person to Handle Your Estate
The most important thing is to select the right person to handle your estate. This can be an attorney, financial advisor, or someone else with a lot of practical experience planning for estates. Experts recommend that you work with an estate planning attorney or a financial planner who has expertise in all aspects of estate planning and trusts. Trusts are complex documents, so you need assistance from someone who knows what they are doing, or it could cost you dearly later on.
Remember, this is not a get-rich-quick scheme. Successful estate planning does not happen overnight. It is a process that takes time and effort on your part. If you begin to think about people’s common mistakes when planning their estates, you could avoid them yourself by having a well-designed estate plan beforehand. Remember that estate planning begins now, today, right when life begins. The sooner you start, the better!
Andrea Gibbs is the Content Manager at SpringHive Web company, a firm that offers web design services, maintenance, and Internet marketing. She specializes in content marketing, social media, and SEO. She also serves as a blog contributor at Wellness Home Care, devoted to encouraging healthy lifestyle choices in senior citizens. When she’s not writing, she can be found running hills or hiking trails, rooting for her favorite team (the Pittsburgh Steelers), or watching a good Netflix series.