Have you thought about how your death will affect the financial health of your loved ones? Proper estate planning is an essential tool to ensure your money and other assets are transferred according to your wishes after you are gone. Even the most financially savvy individuals can make estate planning mistakes. Some common estate planning errors are discussed below.
The first mistake many people make is to rely on Wisconsin intestacy laws and fail to create an estate plan at all. By doing this, it is almost assured that your assets will not be distributed in the way you or your loved ones would have preferred. By taking the time to create even a simple estate plan, you are more likely to leave your assets to those you intended.
Another common mistake many people make when planning their estate is to use online or do-it-yourself estate planning documents. Sure, they sound easy to use but such boilerplate resources rarely take into account the tax implications of your decisions or individual state requirements. Additionally, cobbling together a variety of do-it-yourself documents is not a good recipe for creating a cohesive estate plan. You can protect your loved ones more fully by consulting with one of our experienced estate planning lawyers instead. Our attorneys will help you create an estate plan that takes into account your individual personal and financial situation.
Also, choosing the wrong trustee or executor can cause no end to problems. Choosing the child who seems badly to want that position can have bad consequences. Often it is a good idea to use a bank trust department as executor or trustee. This prevents a lot of mistrust and mishandling of assets destined for loved ones. Sometimes appointing co-trustees or co-executors can reduce mistrust. However, that can also lead to disputes between the named trustees or executors.
An often overlooked item in many estate plans is the designation of beneficiaries and titling of accounts. No matter what your estate planning documents may say, assets such as retirement accounts will transfer to the person or persons designated by you as the beneficiary. Additionally, any property held jointly with a right of survivorship will automatically transfer to the survivor upon your death. It is important to ensure beneficiary designations and property titles accurately reflect your wishes. A forgotten beneficiary designation may result in an asset transfer to the wrong person or unintended tax consequences.
It is also important to fully maximize annual gifts to reduce future estate tax bills. Although estate tax exemptions exist for spouses, charitable donations, and other expenditures, wealthy individuals with a large number of assets should use gifts strategically. An individual may also gift up to $13,000 per year to loved ones tax free. Although Wisconsin currently does not have an estate tax, the federal estate tax exemption is $5.12 million for 2012. That number is scheduled to be reduced to $1 million beginning in 2013. Your estate plan should always factor in known or potential changes in the law.
Finally, when creating your estate plan you should consider whether to leave gifts to your adult children in trust. We live in a litigious society with a high divorce rate. By creating a trust for your adult child, you have the ability to ensure the assets you worked hard to accrue benefit your offspring and are protected from their creditors and former spouses. Depending on your financial situation, failure to consider utilizing trust as a mechanism to transfer your assets to loved ones may be a mistake.
Everyone should have a cohesive estate plan in place. The attorneys at Krause Donovan Estate Law Partners, LLC, are available to assist you with all of your estate planning needs. They will create a comprehensive estate plan that is tailored to your individual circumstances. To request a consultation with one of our experienced attorneys, submit our online form.