Estate owners create an estate plan to protect their assets from the probate process. Some strategies help the estate owner keep more of their money and wealth with their family members. However, some complications can arise if these strategies are mismanaged, or if a family member doesn’t agree with their assignment. Reviewing 4 common pitfalls to avoid shows the estate owner what portions of their estate plan are out of date.
Here are the Pitfalls to Avoid
1. Failing to Update Beneficiaries
Failing to update beneficiaries in the estate plan prevents the estate owner from choosing a new beneficiary if the original family member has died. The standard rule of thumb when it comes to these assignments is to make frequent updates whenever possible. For instance, if the estate owner gets a divorce, he or she will need to make changes to prevent a former spouse from getting additional assets when the estate owner dies. If a beneficiary is dead, too, the family is left to make the choice for the estate owner later. To review more pitfalls of estate planning, estate owners can visit https://www.kanialaw.com/tulsa-estate-planning-attorneys/creating-a-trust and learn more about keeping the plan more accurate.
2. Creating Higher Tax Implications By Selling a Smaller than Average Prices
You cannot avoid tax implications when selling a property. Some owners think they can literally sell an asset to the heir for $1 and completely avoid the tax implications. The issue is that when the heir sells the property for what the asset is really worth, they face a higher than average tax implication due to the gain in property value. If the estate owner doesn’t want to create a financial hardship for their heir, it is best to sell the property for its true value.
This strategy is often used when the estate owner is preparing for life after a diagnosis of a progressive illness such as Alzheimer’s disease. If it is possible for the estate owner to enter into a nursing home, state laws can allow the nursing home to take some assets as payment for services. Some attorneys advise against the sale of the property to a family member as this creates a paper trail of payments that the nursing home could seize anyway. A more effective strategy is just to transfer the deed into the family member’s name.
3. Failing to Keep the Assets in the Will Updated
Failing to keep the assets in the will updated presents major confusion when the estate owner dies. If the asset is listed, the probate court will want to know what happened to the asset and how much money the estate owner received for it. This could lead to a more lengthy probate process, and it could create an issue for heirs when creditors attempt to collect money for overdue debts.
4. Failing to Discuss Asset Assignments With Your Heirs
Failing to discuss asset assignments with heirs can create a lot of stress for the family. First, there is the potential for a legal case as a specific family member disputes an assignment. There is also the possibility that the heir just doesn’t want the asset or the tax implications that follow. Discussing assignments with heirs ensures that all parties are happy with the results, and no one is fighting after the estate owner passes.
Estate owners must follow the directions of their estate attorney to achieve more effective asset protection. However, updates and changes are often needed as new life events occur. Reviewing estate planning pitfalls helps the estate owners avoid common mistakes more effectively.