Naturally, the biggest mistake anyone can make when it comes to an estate plan is not having one at all. Surprisingly, 60 percent of American adults have made this error and have not written wills yet.
When you do write a will and trust, you want to be certain you do not overlook a single aspect. One mistake can greatly compromise whether a court will abide by your wishes. Therefore, you need to avoid the following mistakes at all costs.
Failing to make gifts
You can reduce your total estate taxes by making gifts to your spouse. The Internal Revenue Code states that you can give gifts worth up to $14,000 to a spouse annually. Any gifts provided to other individuals, businesses or groups have estate tax savings up to $28,000. This allows you to put more money into your estate plan to distribute that has no tax on it.
Choosing the wrong person to execute the estate
The executor should be someone you can trust to properly handle the affairs of the plan objectively. Many people give this duty to a spouse or child, but it can be difficult for a loved one to remain objective. Executors, guardians and trustees have extensive duties, so do not distribute these responsibilities lightly.
Not planning for a beneficiary’s death
It is possible for a beneficiary in your will to pass away. This can create complications in the distribution of assets if you fail to update a will. Certain language can help avoid such complications, such as distributing assets to children by including the phrase, “all lawful children equally – Per Stirpes.”
Failing to deal with guardianship issues
Most people focus on leaving behind money and assets in a will. However, when you have children under the age of 18, you also need to consider who will serve as guardian. Additionally, you need to consider who will oversee the money and assets until the child is 18.