Don’t Make These Four Mistakes When Planning Your Estate
If you’re taking the time to write a will to ensure that your heirs are cared for after your death, then you’re already avoiding the biggest mistake you could make when planning your estate—failing to plan at all. Below are some other hazards to avoid when planning how your assets will be distributed.
1) Failing to consider putting assets in trust
Aside from the fact that using trusts will help your heirs avoid the time and expense of probate, trusts can sometimes provide a massive tax savings on those gifts, as well. Using trusts also allows you to control how and when the assets are distributed to heirs who may not yet be mature enough to handle receiving a large one-time gift. If you do use a trust, be careful that the title to any assets you’d like to be in the trust is changed to the name of the trust. Otherwise, the assets will go through probate normally.
2) Not creating an advance directive or durable power of attorney
When you draft your will, use the opportunity to create an advance directive. Also known as a living will, this document outlines which measures you do or do not want taken to extend your life, should you become incapacitated. You should also consider creating a durable power of attorney, which allows you to designate someone to make financial decisions on your behalf. This document can be made to be “springing,” so that it only goes into effect if you have been rendered incapacitated.
3) Placing your heirs’ names on titles to large assets
In order to allow your heirs to bypass the probate process on as many different assets as possible, you may feel tempted to place your child or other heir’s name as one of the account holders for a bank account or other piece of property. However, the IRS will view this as a gift and levy a heavy tax on that asset. Additionally, it could be risky to leave a large asset to someone too young to know how best to manage it.
4) Failing to periodically review your estate plan
Once you’ve created your estate plan, it’s important to periodically review the plan to make sure it continues to be accurate and reflect your wishes. Perhaps you will acquire new property that you would like to give to an heir; perhaps your relationship with one of your heirs will change; or perhaps you will move to a new state, where local laws will alter how your will is executed—many things can occur during your lifetime that could have an impact on how you want your will to read. While going over your will, review the beneficiaries you’ve listed on your retirement accounts or insurance policies. Your beneficiaries will not automatically change to reflect the beneficiaries listed in your will, so you need to manually change each one individually.
If you need assistance in creating an estate plan or updating a will in Indiana, contact the Indianapolis estate planning attorneys at Lee & Fairman for a consultation, at 317-631-5151.