Common Mistakes Can Undermine Your Estate Plan

There are many excuses why our clients don’t initiate, update or maintain their estate planning documents.
Don’t let this happen to you. Take control of your Estate Plan and family’s future by following this short list of Do’s and Don’t’s.
Don’t let the “Excuses” prevent you from proper planning. We can all be very creative with excuses. There is no excuse worth jeopardizing for family’s financial or emotional well being.

Don’t underestimate the extent of your assets. Many clients undervalue their assets; or they don’t include the value of life insurance. Every asset in which you have a “incidence of ownership” will be included for the purpose of Federal Estate Taxes and/or New Jersey Inheritance Taxes. These “unexpected” taxes can undermine your Estate Plan.

Don’t disregard the tax impact. Many clients have amassed large 401K’s, IRA’s or other tax deferred accounts. They believe that their spouse will be well cared for by this money and their children will inherit all of it. The Income Tax and Federal Estate Tax impact can reduce your children’s inheritance by 75%. Bush’s tax relief does not solve these tax problems.

Don’t misunderstand the impact of “titling”. The title of ownership of an asset can dramatically affect your plan. In fact it can change your plan entirely. For example, your Will leaves your summer home to your children from your first marriage. However, the title of that house is with your current spouse as “Joint Tenants With a Right of Survivorship”. That summer house will automatically be conveyed to your current spouse. Similarly, clients have named one child as a beneficiary of life insurance or pension fund; or have added one child’s name to a bank account for “tax avoidance”. This doesn’t work and it creates an inequity; your other children will not have a legal right to share in those accounts/funds.

Don’t assume that people will “know what you meant”. Always be careful to explain and document your wishes in detail. Any vagary will create a problem. This is particularly volatile if you have grown children; multiple marriages; dependent siblings and parents. Remember too, that this can happen even if all parties are acting in good faith.

Do contact me to comprehensively review your estate assets and goals so that we can properly plan your estate to protect your assets and family. The form of documents can be critical. There are certain laws that control if the document is silent. All documents should be properly integrated and consistent. There are different plans available to alleviate taxes; take care of various family members equitably; handle family businesses.

Do complete your plan, sign your documents, fund trusts and name beneficiaries of life insurance.