You might not realize it, but planning your estate is an important step to take to keep your affairs in order. When you die, your assets will be passed down to a beneficiary. Who that beneficiary is, however, is completely dependent on the language in your will and/or trust, or if there is none, state law.
When attempting to plan their estates, people can experience a number of common problems. Do-it-yourselfers sometimes make mistakes of drafting or omission which can have a minimal or a significant impact on their heirs.
Here are 5 common estate planning mistakes.
1. Not Planning for the End of Life
Often, when people are planning their estates they focus only their assets-who they will be passed down to, how they will be handled, and so forth. What these people typically don't focus on is their health, including their likely longevity and quality of life.
Did you know that you can provide for a person to authorize a "Do Not Resuscitate" order in your lPower of Attorney for Health Care? This order designates that no further medical attention is needed if you are incapacitated without a hope for recovery. While you hope to avoid situations such as these, they are a possibility, and must be planned for.
2. Doing Nothing to Minimize Estate Tax
When a person dies, his or her estate is subject to a number of different death and income taxes. Unfortunately, these taxes lessen the dollar value of the estate when it enjoyed by his or her beneficiaries.
While you may not be able to eliminate these taxes entirely, you can minimize them. This can be legally done in a number of sometimes complex ways. Giving a gift during life or through a trust, passing assets down as an inheritance, and transferring your life insurance policy to a trust are all typical ways to minimize taxes.
3. Passing Up On Valuable Exemptions
Did you know that you can get a federal tax exemption of up to $11 million, indexed for inflation, until 2026, and $5.5 million, indexed for inflation, thereafter? This one exemption, doubled for a married couple, can have a huge impact on taxes on your estate, reducing the total tax burden substantially.
Some states, like Illinois, have substantially lower estate tax exemptions. Illinois only has a $4,000,000 exemption, and it is NOT "portable" to a surviving spouse.
So, if your Illinois estate exceeds $4,000,000, and you just "let the chips fall where they may", your heirs may be paying unnecessary tax at rates up to 40% of what they would otherwise inherit.
4. Failing to Make Updates
Life is ever changing, so it stands to reason that your estate plan should reflect life's changes as well. Therefore, if you're not regularly updating your will and/or trust, you may be making a mistake.
Divorces, births, deaths, and other such occurrences can drastically change the dynamics of your estate plan, designating assets to unintended beneficiaries. It's wise to check up on the state of your will every 5 to 7 years to ensure that it's still up-to-date.
5. Doing it Alone
Perhaps the biggest mistake you can make when attempting to create a will is to do it on your own. Unless you're an experienced estate attorney, you probably don't have the knowledge to create an ironclad will that will withstand legal scrutiny, and accomplish what you want, particularly in unusual or unforeseen circumstances.
There is a great deal of complex legal language which you must understand to ensure that your wishes come to fruition. Your estate and your end-of-life wishes will only be handled the way you want them to if you very clearly specify them in your estate plan documents , in legally acceptable language Don't take any chances by trying to do it alone.
Avoid These Estate Planning Mistakes with the Help of an Estate Lawyer
The best way to avoid estate planning mistakes while drawing up your will and other estate planning documents is to work with a professional attorney experienced in this area. Estate lawyers know the ins and outs of estate planning and will be able to help you draw up a set of documents that specifies your exact desires.
Looking for an estate lawyer in Park Ridge, Illinois or its surrounding areas? The experts at John J. Pembroke & Associates can help. Our team of seasoned attorneys can expertly guide you through the estate planning process.
Contact us today to schedule an appointment!