4 Top Estate Planning Mistakes

Estate planning is crucial to any legal and financial plan you create. The thought of your spouse and children, or other beneficiaries missing out on what you intended to leave them because of poor planning on your part, should motivate you get it done right. Avoid these top estate planning mistakes, and you won't leave behind legal hassles and headaches for your loved ones.

1 -Failure to Plan

Pretending that you won't die some day, or that the time is far off, is no way to care for the beneficiaries that you purport to love. There are so many sad stories about the death of one income producing spouse who dies without a will, and as a result the non-income producing spouse loses the house and other assets to tax liabilities, debts and court battles with relatives. Had the deceased individual bothered to do basic estate planning, none of that would have happen. Don't leave your beneficiaries in an awful legal and financial mess. Hire an estate planning attorney or do as much research as you can to help make a solid plan that protects your estate and beneficiaries. Update the plan from time to time, so that it doesn't become antiquated.

2 - Leaving Everything to Spouse

One tax strategy to take advantage of is dividing your assets, so that you don't leave everything to your spouse. Your spouse can claim an estate tax credit, only if you don't blindly leave everything to them in a will. Inheritance taxes are significant and can pose a threat to your beneficiaries, if they need to live off of what you leave behind. Do your spouse a favor, and develop an estate planning strategy where you divide your assets between your spouse, children and grandchildren.

3 - Improper Use of Jointly Held Property

In a desperate move to avoid probate court, some people have tried to transfer ownership of their assets to a joint tenancy arrangement between themselves and one other person. The problem is that your assets can be tapped to pay judgments from lawsuits won by creditors against your joint tenant. Use proven estate planning strategies to keep as much of your assets as possible out of probate, not this one.

4 - Ignore Annual Gift Tax Allowances

There are some tax strategies you can do while you're alive to leave behind an inheritance that isn't taxed to death. One that's easy to implement, is making an annual gift to beneficiaries. You can make a gift up to a certain amount each year, that's tax free. Each year is different, so you'll have to check for changes each tax year. In 2009, the amount was up to $13,000. For example you could gift $8,500 to your child, and $13,000 to your spouse as a gift, and the total ($21,500) wouldn't be taxed. Let's say you don't have a significant amount of cash to give. Consider gifting personal belongings and real estate instead. You're still subject to the same limits, but it's better to take advantage of paying no tax now, then to have your estate owe taxes later.

Estate planning issues are tricky, because of the tax implications. It's worth spending the money to hire an attorney to help you sort out these matters.

 

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