Estate planning is a serious responsibility for every adult, but unfortunately, a significant percentage of people have not executed all the appropriate estate planning documents. Plus, those that do often make mistakes that yield unintended consequences.
In this blog post, we will look at five estate planning mistakes that you should definitely avoid.
Taking Matters Into Your Own Hands
There are websites on the Internet that sell boilerplate estate planning documents like last wills. In fairness, technically, you do not have to be a lawyer to create a valid last will.
At the same time, when experts look into the subject, they advise against do-it-yourself estate planning. Three legal professors that were engaged by the highly respected magazine Consumer Reports found flaws in DIY last wills that were created using online worksheets and downloads. The magazine recommended against do-it-yourself estate planning.
Plus, there is the matter of choice. If you simply decide that you should use a last will as your vehicle of asset transfer, you may be overlooking more viable options.
Estate Tax Exposure
Some people think that only very wealthy people are exposed to estate taxes. This would all depend upon your definition of the word wealth.
The federal estate tax exclusion is $5.43 million right now. This is the amount that you can transfer tax-free. Your home and any other real estate that you own and your life insurance policy proceeds count as part of your estate, and this is something to take into consideration.
There is also a state-level estate tax to contend with if you are a resident of the state of New York. That exclusion is just $3.125 million through the end of March.
We should also point out the fact that there are other states with state-level estate taxes. New Jersey is one of them, and the exclusion in New Jersey is just $675,000. There is also a state-level estate tax in Connecticut. If you own property in a state with its own state-level estate tax, the estate tax in that state could be applied after your passing.
If you face estate tax exposure, there are things that you can do to preserve your wealth. If you do nothing, your family could pay a considerable price.
Failure to Address Incapacity
Many elders become unable to make sound decisions at some point in time, with Alzheimer’s disease being a leading cause of incapacity. If you do not plan ahead for this contingency, the state could ultimately appoint someone to act on your behalf.
You can empower your own hand-picked decision-makers if you include an incapacity plan within your broader estate plan.
No Nursing Home Asset Protection
Medicare does not pay for long-term care, and most elders will ultimately require living assistance. Since nursing homes are very expensive, the inheritances that you intended to leave to your loved ones could wind up in the coffers of an assisted living facility.
However, there are nursing home asset protection strategies that can be implemented if you act in a fully informed manner.
If you would like to discuss your estate planning goals with a licensed legal professional, send us a message through this page to set up a free consultation: Smithtown NY Estate Planning Attorneys.