The United States is on the cusp of one of the largest wealth-transfer periods in its history as nearly $68 trillion is set to be passed along to future generations within the next quarter-century.
That timeframe promises excellent opportunities for those already engaged with estate planning strategies that fit their needs. However, it’s vital to avoid all-too-common mistakes in an ever-changing legal and tax environment.
Four avoidable estate plan failures
Working with an experienced estate planning attorney can help you easily avoid these common errors:
Beneficiary designations: Naming heirs in a will is one thing. Failing to designate or update beneficiaries in accounts that lie outside a will is another. Make sure bank and investment accounts and retirement plans list the people you want to receive those assets, or costly probate issues could result.
Listing minors as beneficiaries: Listing grandchildren or young kids as beneficiaries can result in unintended consequences as most minors can’t take legal control of property until they are 18 years old. This means establishing a trust and designating a trusted person as a trustee for a minor child’s property in your will is crucial.
Not funding a revocable trust: Creating a revocable trust can be a valuable step to pass along assets quickly and efficiently. However, too many forget to fund them by moving bank or investment accounts, insurance policies or other property to the revocable trust upon their death. Failing to fund a revocable trust or including unclear instructions can result in those assets going through probate.
Tax troubles over retirement funds: Heirs, except for surviving spouses, can face steep tax consequences when receiving retirement accounts, including 401(k)s or traditional IRAs. You can get around this by converting these assets to a Roth IRA or insurance policies during your lifetime. Taking these actions can help your heirs receive those funds tax-free.
What is the biggest mistake?
Statistics show that a majority of American adults do not have an estate plan in place. Many believe they are not wealthy enough or are too young to start the process.
However, regardless of your age or net worth, creating a plan ensures that your loved ones are taken care of after you’re gone and that your assets are distributed according to your wishes.
Working with a knowledgeable estate planning lawyer can provide relief and satisfaction that you’ll positively affect the lives of those you love for many years to come.