Top 10 Estate Planning Mistakes

Estate Planning is primarily the effective and efficient transfer of assets from one generation to the next. If you do not have a two million dollar estate, it does not mean you can ignore the basic rules of estate planning. If properly planned, your assets can AVOID all or part of:

Probate
Estate Taxes
Federal Income Taxes
Capital Gain Taxes

If properly planned, you can also avoid confusion and misunderstanding regarding who gets your assets at death. A review of the top ten mistakes listed below will be most beneficial to you.

Lack of a master strategy and a game plan
- Most people let their CPA handle their taxes, their attorney handle their legal work, their broker handle their investments and their insurance agent handle all of their insurance. No one advisor has the road map for your financial future, so no one can help guide you back when they make a wrong turn.
- It is important to have a captain for the team. You should have someone who can coordinate the game plan and make changes when appropriate.
Lack of adequate records
- If you were kidnapped on the way home today, would your spouse and family know where all of the important documents are? Your team captain should know who your trusted advisors are.
- Just having a power of attorney or medical directive is not enough. These documents must be presented to the proper authorities to implement them. If the documents are hidden in a sock drawer and no one knows where to look, it's as though the documents had never been executed.
Failure to stabilize and maximize the value of estate assets
- Proper Asset Allocation
- Proper Insurance
- Proper Buy/Sell documents for business owners
All lead to stable values and protection for your loved ones.
Improper disposition of assets
- I will leave the ranch to my son and my "other assets" to my two daughters. That's great unless your "other assets" are used up to pay final expenses or estate settlement costs, then the son gets the ranch and the girls get...?
Leaving everything "outright" to the spouse
- Uncertain tax laws at the time of death may make it unwise for you to leave everything outright to your spouse.
- In addition, surviving spouses are often inexperienced or intimidated when it comes to managing the family assets. A trust and corporate trustee may ease the burden of asset administration for the surviving spouse.
Will errors
- Wills should be reviewed at the birth, adoption or death of a family member.
- Wills should be reviewed when a family member gets married, divorced or separated.
- Also, reviews should take place when Congress passes new tax legislation or when your financial picture changes significantly for the better or the worse.
Selecting the wrong executor
- The executor must "without conflict of interest"
  - Collect all assets
  - Pay all debts
  - Distribute the remainder to the beneficiaries
Lack of liquidity
- Federal estate taxes, federal income taxes, probate and administration fees, final expenses, payment for maturing debts, cash for surviving family members and funds to continue the family business are all drains on liquidity at death. Is there enough liquidity in your estate?
Improperly arranged life insurance
- If the insured has "incidence of ownership" in a life insurance contract, the full death benefit will be included in his or her estate.
- Not only are many contracts improperly owned, but also improperly funded. If premiums have been insufficient to cover the expenses of the contract or if earnings in the policy are off; the contract may "die" before the insured.
Improper use of jointly held property
- Property passes first by title, then by will.
- Many married couples hold the bulk of their assets jointly. This means that the first spouse to die loses the opportunity to take full advantage of their federal estate tax credit by directing specific assets to heirs, other than their spouse.
- One of the first and best ways to avoid estate taxes is to take advantage of the estate tax credit the government allows. If you leave all of your assets to your spouse, you forfeit their share of this valuable benefit.
- Keep in mind that tax laws change and your estate planning needs to be flexible enough to change with the law.