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Avoid these Top Estate Planning Mistakes

JohnPatrick Brown • Apr 19, 2022

A good estate plan avoids these top mistakes.


A good estate plan protects and provides for the decedent's heirs. It shouldn't cause more problems than it solves. But not every estate plan lives up to this ideal. If you want your wishes carried out, below are the top mistakes you need to avoid.


  • Failing to plan. If you don't make time to create a thorough estate plan, you're risking the financial future of your estate, your legacy and your loved ones.


  • Not reviewing your documents to make sure they're not out of date.


  • Not discussing your plans with family and friends. Even a brief conversation with your beneficiaries can tell you which of your wishes are likely to be controversial, giving you a chance to rethink.


  • Naming just one beneficiary. In case your only heir dies before you do, you'll want to have a contingent beneficiary.


  • Forgetting that your retirement plan accounts or life insurance can't be included in wills or trusts. You'll need a beneficiary designation form or to name a revocable trust as the beneficiary.


  • Forgetting about power of attorney or health care representatives. These folks step in to make decisions if you become incapacitated. In most cases, the roles dissolve on your death.


  • Not delineating what your final arrangements will be. Not giving some indication of what you'd like to happen at your funeral or with your burial arrangements puts an extra burden on your family when they're grieving. Let them know what they can do to honor you.


  • Failing to include your digital assets. You should include a digital estate plan that lays out how you'd like all your digital assets — social media accounts, online banking and email — handled after you die, and name a digital executor to ensure your digital assets are handled properly.


  • Not detailing what charities you want to allocate some assets to. It's important to provide for your heirs but also to provide for other causes. That's why you may want to name a charity as a beneficiary with the proceeds from an investment or a life insurance policy.


  • Not planning for all contingencies. Wills often leave an estate to the testator's "surviving children," but that raises questions if one of the testator's children dies. Does the money go to that child's heirs or is it split among the survivors? Morbid as it may seem, wills should plan for all those possibilities.


  • Failing to fund your trust. Creating a trust is only half the battle. A trust is useless unless it's funded with your assets.


  • Forgetting about taxes. You should know whether the state that you and your beneficiaries live in has a state estate tax or inheritance tax. Understand the limits before you write your will or trust.


  • Failing to store your estate plan properly. A perfect estate plan is useless if no one knows where to find it. Safes and safety deposit boxes are popular options but remember to tell someone that it's there and how to access it.


Go with qualified professionals.


There are many myths and misconceptions about estate planning. Help your family save thousands of dollars in unnecessary taxes and probate fees by sidestepping errors. By including Nash Bean Ford & Brown, LLP’s experienced estate planning attorneys and other professionals, you'll have help in drafting your plan and making any changes you want to make.

27 Mar, 2024
Estate and inheritance taxes are both types of taxes levied on the transfer of property at death, but they operate differently: An estate tax is levied on the estate of the deceased while an inheritance tax is levied on the heirs of the deceased. There is a federal estate tax, which generally affects only the wealthiest Americans. The federal government does not levy an inheritance tax. However, in 2023, 12 states and the District of Columbia levied an estate tax, six states levied an inheritance tax, and one state (Maryland) levied both. That said, estate and inheritance taxes do not come into play when assets are left to a spouse who is a U.S. citizen. State estate taxes usually are higher than inheritance taxes, and they can impact families in unexpected ways. However, they generally come into play if the taxpayer considers one of these states their permanent home or if they have property there. This means that many taxpayers can unexpectedly find themselves owing thousands of dollars, especially when they inherit real estate that has appreciated over the years since it was originally purchased. Consider this statistic: According to the U.S. Bureau of Labor Statistics, prices for housing are 936.78% higher in 2023 versus 1967 (a $936,779.24 difference in value). You need to be proactive. So, what can be done to prevent this from happening? Know the tax estate and inheritance tax thresholds in your state. These rates can change for various reasons. For example, the inheritance tax rate may vary according to the heir's relationship to the decedent or the rate may be adjusted for inflation, effectively lowering the amount of the tax. In most states, estate taxes are progressive: The tax rate increases with the total value of the decedent's assets, but two states have flat estate taxes with a single tax rate. The highest top rates in the nation range from 16% to 20%. In addition, all states prevent smaller estates from being subject to these taxes by allowing certain exemptions from their estate tax. The lowest exemption is $1 million, and the highest exemption is $12.92 million. Taxpayers who have estates near those limits can consider giving away assets to reduce the value of their estates. Alternatively, they could include a clause in their will stipulating that any amount over the exemption amount should be given to charity. Be aware that: You may be liable for estate taxes even if you live in another state. The determination is made based on where the property is located. In some circumstances, it may make sense to relocate to a state that does not impose estate or inheritance taxes. In many states, married couples must create an irrevocable trust (e.g., a credit shelter trust) to take full advantage of the exemption amounts for both spouses. Similarly, living trusts, irrevocable trusts, grantor retained annuity trusts, and certain other trusts can be set up for children and other beneficiaries. Irrevocable trusts allow property to pass without an official property transfer, thus avoiding taxation. These trusts need to be part of your estate plan. Cash received as an inheritance is not taxable. However, if the cash later generates income, that income may be taxable. Taxpayers with property, especially real property, located in states with high estate and inheritance tax rates should consult a tax professional to ensure their estate plans are as robust as possible. This is just an introduction, and rules from state to state can change. Be sure to keep in close touch with tax and estate planning advisers to make sure there are no unpleasant surprises. 
19 Mar, 2024
Medical decisions are highly personal choices, and they are relatively easy to make when your mental faculties are still with you. But with the possibility of illnesses that can rob you of your decision-making skills, how do you know that your personal wishes are being considered while family members are calling the shots about your healthcare? Before you are unable to establish these decisions in writing, it is important that you do all you can to protect yourself. Let's take a closer look at some of the most basic options. Living wills. The first step in the process is to make sure you have a living will in place. This document describes all of the things that are most important for you in terms of care when you are unable to make those decisions for yourself. The most basic information includes whether or not you want to be resuscitated or kept on life support. But it can go beyond that as well, up to and including what kind of funeral arrangements you would like. Medical power of attorney . Going hand in hand with the living will is your medical power of attorney. For most people, your spouse will automatically be the individual with whom medical facilities and professionals consult in the event that you cannot make your own decisions. But there may come a time when this is no longer possible. Selecting someone you trust to make these decisions for you can be critical to ensuring that your wishes are met. Advanced directives . In some states, these two things are combined to create a single legal document called an advanced directive. This is why it is important to work with a legal expert to make sure that you are creating and signing the correct information. Direct conversations. Beyond all of the legal documents that will help cement your wishes for the future, it is essential that you begin having conversations with your loved ones long before you have the need for invasive care. It can be uncomfortable, to be sure, but it is necessary. Talk to your spouse, your children, your siblings, or anyone else who may be involved in your long-term care or future medical interventions. Have you considered the planning for your living wills or medical power of attorney? Call the experts who can help you work through this process and provide peace of mind for your future.
23 Feb, 2024
What you should know
14 Feb, 2024
When the Titanic went down in 1912, several women chose to remain on board and drown with their husbands; most famously was Ida Straus, whose family co-owned Macy's Department Store. Although Titanic-scale disasters are extraordinarily rare, you should nevertheless include a contingency beneficiary in your will or trust in case life or death throws you a curveball. The contingent's role If primary beneficiaries are unable or unwilling to receive an asset left to them in a will or trust, the next-in-line contingent steps in. The primary might be unlocatable or dead. Contingent beneficiaries serve a similar function when it comes to life insurance and bank, security, retirement, college savings and health savings accounts. In some states, even vehicle and real estate owners can designate contingents. While family and friends are typical recipients, contingent beneficiaries can be people, organizations, estates, charities or trusts. However, note that minors and pets cannot assume the role, because they have no legal power to accept assigned assets. A child requires a guardian for the assets; pets would require a trustee to administer funds for their lifetimes. All the primaries must be dead or have renounced their share before distributions are made to contingents. If one primary dies, though, the assets are divided among the other remaining primaries. Why you should name contingents You can avoid the time and expense of probate by specifying contingents. Rest assured that they have no rights over your assets while you are alive and may not even realize they are beneficiaries. Unless an account is irrevocable, you can freely change them. In fact, you should regularly review your estate plans, including your contingents, to confirm they are up to date with your life events — births, deaths, marriages, divorces, etc. For example, after a divorce, children who were formerly contingents may now become primaries. Or you may simply have a change of heart, which is entirely permissible. You can also attach strings that a primary must meet before they receive an inheritance from you. Preconditions run the gamut, from graduation to religion to marriage to staying out of jail to giving up smoking! If the person you select to inherit ends up as a chain-smoking jailbird, a contingent beneficiary might take his or her place. Many testators also select a favorite charity or nonprofit as the ultimate contingent. Rather than four or five heirs down the pecking order, they prefer to designate a church or college over some distant family member. Facing Armageddon Back to the Titanic. It is not unusual for spouses or family members to die in rapid succession, albeit rarely in ocean liner disasters. Still, airplane crashes and highway pileups happen. Adding to the turmoil, parties might have named each other as reciprocal primary beneficiaries. To preempt inheritance chaos, attorneys use Titanic clauses, particularly for high net worth clients, those with young children or those in second marriages. Also called an "all dead" clause, it kicks in if all your primary and contingent beneficiaries die in one swoop. Here again, nonprofit institutions could outlast everyone. Couples in second marriages may also own property with joint rights of survivorship, meaning a house might arbitrarily end up with the children of whichever parent is assumed to have died second and thereby cut out the step-siblings. Many states rely on the Uniform Simultaneous Death Act, which essentially provides that if two people die within 120 hours of one another, each will be deemed to have predeceased the other. In other words, their respective estates are allowed to pass assets to heirs as contingents rather than transferring them back and forth as primaries, which could theoretically involve multiple probate processes. This explains why many wills mandate that a beneficiary survive the will writer for a certain time period, up to several months. The consequence is that the asset passes as if the original beneficiary had died first and the legacy goes straight to the contingent. It may help preclude extra estate taxes or extra rounds of probate.  Consult an estate lawyer or a financial planner about shoring up any estate documents to include contingent beneficiaries and keep them up to date.
06 Feb, 2024
Who's responsible for valuation of assets? If you're the executor of an estate, part of your job is to oversee the valuation of assets. Finding out how much the estate is worth and how that value is distributed will determine your approach to probate, the allocation of the assets among the heirs and how much the estate will pay in taxes. Particularly with larger estates, valuation can be a substantial responsibility. It may require you to bring in experts to value antiques and other collectibles. If the estate is undergoing probate, you'll need to submit the asset values to the court. Probate rules for estate valuation vary somewhat by state. In some states, courts look at gross estate value; in others, at net estate value. Some have separate rules for smaller estates. While all personal property is probated in the decedent's home state, real estate is probated in the state in which it's located. Some assets, such as 401(k)s that have beneficiary designations, normally bypass probate. Expect to be challenged — by the IRS, by heirs, by creditors or by the court — whenever you value assets. Be sure you're valuing everything reasonably. Certain types of assets are easy to value. The contents of a bank account or shares of stock in a publicly traded company won't give you any trouble. To value a stock, commodity or precious metal, average the highest and lowest selling price for similar items on the owner's date of death. For mutual funds, use the closing valuation. Other assets — a used car or collectible, for example — don't have such a definitive value. You estimate their value by using public references for collectibles. When valuing real estate, you can check out the tax assessor's valuation and talk to a real estate agent about sales of comparable properties. Go with the pros For assets that are really difficult to value, like artwork or a private business, you'll probably need to hire a professional appraiser. Appraisers typically charge from $125 to $400 an hour, often with an extra charge for visiting the site. Avoid appraisers who charge based on a percentage of the asset's value. This goes against the ethics of the Uniform Standards of Professional Appraisal Practice. Ask whether the appraiser has any certifications or memberships in professional organizations, and ask for a written estimate of the appraisal fee in advance. Books, tools and appliances are among the items that can be listed as household contents, and you can ask for one overall valuation estimate for them. If there are individual items that were specifically bequeathed in the will, you may want to get an individual appraisal for each. The value of household items should be done based on what a buyer would pay for the items as is. The heirs may decide to sell everything in an estate sale. In that case, use a reputable estate sale company. Descriptions and values should be seen as general guidelines because there are variations in quality and condition as well as changes in economic conditions and local demand. As you proceed with the valuation, be aware of the pitfalls. Heirs may be upset if a particular asset doesn't realize the value they expected. Document your work in case there are questions later, and work closely with legal and financial professionals as you move forward.
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