Do you think you are too young to plan for your estate? If you think the answer to that question is a yes then you are mistaken. Nearly half of Americans over the age of 55 do not have a will or any type of estate planning in place in the event of their death or not being able to make medical or financial decisions for themselves. By not acting you could be setting your estate up to costly probate or the intestacy laws of your state. By adhering to the following tips, you can avoid some of the more common mistakes that no estate planning can create for your heirs.
Many people think that they are too young or do not have enough assets to plan their estate properly. No matter how young you are or how many or few assets you have you need a will no matter what. In the event of your death, a will ensures that your final wishes will be carried out. If you do die without a will in place, then your state’s intestacy laws will dictate who gets what. I am not sure about you, but I do not want a judge to determine who gets what in the event of your death. And in the event you need to have someone make decisions either medically or financially you need to have a power of attorney in place to ensure your wishes and desires are carried out in the event you are incapacitated. This can save your family a lot of money and can help avoid family arguments over who controls what. Also, to help avoid probate issues, make sure all of your beneficiaries are appropriately named to ensure that those who you want to receive such accounts such as retirement and life insurance policies get them.
Many people think that joint ownership of property is the key to passing on assets to those you want to receive them. While this does accomplish this, it also has pitfalls associated with doing it. Once the title has been put on a joint ownership status whoever you have named as the joint owner has full access to the entire account and property. So before you go this route make sure the joint owner is one who is competent and trustworthy. To avoid this issues use payable-on-death designations instead to pass ownership when you die instead of the joint ownership. For brokerage accounts and such most states have adopted the Uniform Transfer-on-Death Securities Registration Act. This acts in the same manner as payable-on-death allowing the transfer of these assets outside of probate. There is also a transfer-on-death that permits the transfer of title upon your death to your heirs also to avoid probate. These laws vary from state to state so check on your state’s practices.
Now you also need to be aware of what a will does not do. With items such as life insurance, IRA, and 401(k) accounts a will does not allow you to name who gets the asset. That can only be done with a proper designation of a beneficiary. To do this, deal with the firm that oversees the account such as the life insurance company or your IRA custodian and name the beneficiary with them directly. Also, assets that are transferred in the manners mentions in the above paragraph the will does not override those actions either.
If you have an heir, that may not be financially responsible or capable to manage their affairs you can always use trusts to help protect them. This is fairly simple to establish and manage after you are deceased. The key here is also to include instructions on how the trust is to be paid out to the heir.
And many issues in a family, after you have died, do not arise out of the items left in a will or through that of the beneficiary designation. Most family arguments arise from items that do not have a title in which to pass the item on to the heir or was not included in the will. Prior to executing a will, you need to consider these items that may hold some sentimental value for one family member over another. Consider these aspects of your estate when you draw up your will or leave it to the probate judge and the intestacy laws of your state.
And finally many people over complicate their estate plans when there in reality is no need to do so. The federal estate and gift tax exemption was $5.43 million in 2015, meaning a couple is allowed $10.86 million before estate and gift taxes will take effect. The spouse’s exemption is portable now so even if one did not pass on the full amount the remaining spouse can benefit from the unused portion.
If you have any questions or need any additional information feel free to contact me.
