Only a little more than half of Georgia parents have an estate plan, such as a will or living trust document, in place. Even when parents do have the documents, many of their adult children do not know that such documents exist, or the contents of the documents. So often the surviving family members are left not knowing where to – or whether to – find a will or a trust. Without an estate planning, however, the surviving family may have to go through a lengthy and expensive legal process.
It is important to have an estate plan in place for anyone, not just the elderly, sick, and wealthy. Estate planning can ensure that your personal and financial affairs will be handled properly when the inevitable or the unfortunate occurs. It can also help maximize the actual value of your estate (for example through tax benefits).
However, even where you have drafted a will or a trust, it may not be executed smoothly for reasons such as not updating the document or administering it improperly. Below are the most common estate-planning mistakes you should avoid if you want to fully enjoy all the benefits of estate planning.
Mistake 1: Not having an estate plan at all
When it comes to estate planning, the biggest common mistake people make is: not having an estate plan at all. The reasons why this is the case are varied. Many people believe that only the wealthy need to have an estate plan. Others may be afraid to think about and plan for their death, or feel uncomfortable to discuss it with their spouse. Whatever the reason, it is important to have an estate plan for most people irrespective of their income and assets. If you want to have control over what happens after you die (or become incapacitated), you need a written, legally documented estate plan.
If you fail to develop an estate plan, the state will draft an estate plan for you which may not be in line with how you want your assets divided and distributed. In addition to determining what will happen to your money or property after you die, estate planning also includes tasks like setting up a living will, deciding on a guardian for your minor children, or pre-planning funeral arrangements. So, having an estate planning is important for you to ensure that both your financial and personal affairs are handled properly if you become incapacitated or die.
Mistake 2: Failing to review and update your estate plan
Drafting a will and a trust, and naming beneficiaries, guardians, executors and trustees can be painful. So many people feel relieved and want never to deal with theses tasks once they are done. However, estate-planning cannot be done at once because no matter how much we plan in life, things always change.
Accordingly, you should review your estate plan every few years and update it if necessary. The estate plan should also be reviewed to incorporate significant life events, as well as your different goals. Significant life events include: relocation to another state, birth of a child or grandchild, receipt of an inheritance, marriage, death of an intended beneficiary, and acquisition of real estate. Additionally, if there are significant changes in both federal and state estate tax law, you should make certain to review your estate plan.
Mistake 3: Not planning for a physical or mental disability
You should be prepared for an unexpected or long-term disability which can have serious consequences on your personal and financial affairs. Your estate plan, therefore, needs to set forth who will make decisions for you if you become incapable of making them yourself. Many people focus on death when they think of estate planning. But estate planning can come in handy when people are unfortunately involved in an accident, and they are incapacitated or become disabled. Within the estate plan you can designate someone to manage your personal and financial affairs (such as handling your finances, raising your children, or making healthcare decisions) on your behalf, and can leave them specific instructions so that your wishes and preferences are being considered.
You need to appoint powers of attorney for financial matters and a power of attorney for potential health care needs, while you are in good health and still able to make decisions independently. A power of attorney is a document that allows you to appoint a person or organization to manage your affairs if you become unable to do so. A power of attorney for financial matters guarantees that your finances will be handled properly by someone you trust. A power of attorney for health care or medical directive will make important medical decisions on your behalf according to your wishes. If you have a durable power of attorney for both financial matters and health care needs, you will be able to avoid costly and time-consuming court proceedings to appoint a guardian or conservator to act on your behalf if you become physically or mentally disabled.
Mistake 4: Not reviewing beneficiary designations and asset ownership
Certain types of assets do not pass based upon the will. Rather, assets such as life insurance policies or retirement plans are passed directly to the recipients you specify on your beneficiary designations. Other assets such as bank accounts or real property held as joint tenants with right of survivorship are passed by “right of survivorship” (where the surviving owner automatically absorbs a dying owner’s share of the property).
Many individuals unintentionally fail to update their intended beneficiary in accordance with life situations such as divorce, death, or birth of a family member or another loved one. This may result in an unintended beneficiary, such as a deceased person or a former spouse, listed on the beneficiary designation form. Also, even if you intend to leave a joint bank account to all your children, and you only designate one child as a joint owner of the account, only that child will own the account upon your death. Therefore, when you plan your estate, it is imperative to review these types of assets to make sure that the individuals designated as beneficiaries are those you intend to receive the assets.
Mistake 5: Not transferring your life insurance policies to a life insurance trust
A common misconception people have about life insurance is that the policy is tax-free. It is important to understand that life insurance death benefits are not subject to income tax, but they are subject to estate taxes, if the policies are owned by the insured at their death. This results in most of the insurance proceeds (up to 60%) going to the Internal Revenue Service (IRS) instead of your intended beneficiaries.
However, if you set up a life insurance trust, and transfer the ownership of your existing policies or purchase a new policy through an irrevocable life insurance trust, you can avoid paying unnecessary estate taxes. It will also spare your spouse or beneficiary some trouble in waiting for months to be paid the proceeds.
Avoiding These Mistakes is Easy With a Georgia Estate Planning Attorney
Even for those who realize that an estate plan can benefit them, they wait until the last minute to get their estate plan together. To avoid the stress of not having powers of attorney in place appointing people to manage your financial affairs and health care decisions, you should consider starting the estate planning process as soon as possible. If you have complicated assets or if you have doubts about your own ability to draft an estate plan, it is advised to meet with an experienced estate planning attorney to help you draw up an estate. Call us at 770-609-1247 to speak with an an experienced Estate Planning Attorney can provide you with advice based on the specific needs and demands of your estate. Contact >>