The United States will experience an astounding amount of wealth being transferred over the next quarter-century. An estimated $68 trillion is expected to transfer to the next generations.
Making sure that your estate is distributed according to your wishes while complying with ever-changing tax and estate planning laws can be challenging.
Prevent these expensive errors
Working with an experienced estate planning attorney is the first step to creating a plan that meets your needs. Utilizing their knowledge along with these safeguards can save you and your beneficiaries money, time and headaches:
- Designate and update beneficiaries: Failing to correctly name beneficiaries is one of the most common estate planning mistakes, especially when the accounts are set up. Make sure these designations are up-to-date for items outside your estate plan, such as insurance policies, retirement plans and investment accounts. This helps these assets transfer directly to beneficiaries, bypassing probate.
- Name a guardian for minors: Naming a minor as a beneficiary can result in problems if they are still minors when you die, as they cannot take control until they turn 18 to 21, depending upon the circumstances. Without a designated guardian, the court will appoint someone to manage the assets on their behalf. You can avoid any concerns by naming someone you trust as their guardian in your will.
- Fund your trust: Too many people establish a trust to distribute their assets but fail to put a plan in place to fund it when they die. Doing so may require changing ownership in banking or investment accounts from yourself to the trust. The trust may also be designated as the recipient of insurance proceeds and annuities.
- Ease the tax burden on heirs: Taking steps, such as converting 401(k)s and traditional IRAs into Roth IRAs can save your beneficiaries from paying taxes on their inheritance. Another way is to fund life insurance policies using withdrawals from retirement accounts. Your lawyer can assess your situation to make sure your heirs aren’t stuck with a tax bill.
Don’t forget the “planning” part of your estate plan
Estate planning can be foreign – or even frightening – to most people and one that too many put off until it’s too late. However, for people of all income levels, it’s vital to taking care of their loved ones once they’re gone.
Spending a few hours with a knowledgeable attorney and reviewing and updating your plan when significant life events occur is the best way to achieve peace of mind while you’re still here, knowing that you will positively affect your family’s life for many years to come.