Long gone are the days of our youth when we thought we were immortal. Time eventually catches up to each one of us, which is why it is important to establish an estate plan sooner than later. If we fail to plan, New York's laws of intestate succession will intervene and create one for us.
The Do It Yourself Mentality
Handling your own estate is very different than doing your own home project. While doing it yourself can be admirable when you're painting walls or laying tile, it is wise to seek a professional advisor when treading the complex waters of estate planning.
Failing to Update Estate Planning Documents
The failure to update estate planning documents can erase the benefits that estate planning documents offer. Check your documents annually to ensure that beneficiary designations are current and up-to-date, especially on retirement accounts, and after a divorce or death in the family.
Not Accounting for Disability
Dying is not the only reason for estate planning. An unexpected accident or illness can result in a long-term disability, which can have a major impact on your financial affairs. Your estate plan can address who will handle your finances, raise your children, and make healthcare decisions on your behalf.
Not Utilizing Trusts
Some people mistakenly believe thattrusts are just for young children. In actuality, trust are excellent asset-protection vehicles that can be used for the entire family and they can protect assets from creditors' claims.
Forgetting About Digital Assets
In today's digital age, most of us have passwords to a host of digital assets. When a person dies, often their spouse or heirs do not have access to the passwords for the digital assets. To prevent his from occurring, make a list of your online usernames and passwords, and make sure that the appropriate spouse, family member, or trustee has access to that information.
Not Using Gifts to Reduce Estate Taxes
One of the most common estate planning mistakes is the failure to make gifts to reduce your taxable estate. Gifts to your spouse are not taxable, and together you and your spouse can gift each donee $28,000. As an individual, you can gift up to $14,000 per year to each donee. Not only does this leave more money in your estate for distribution, you can create a positive impact on a specific person or on an individual cause of your choosing.
Not Transferring Life Insurance Policies to a Life Insurance Trust
Many people are unaware that the proceeds from a life insurance policy are subject to a heavy estate tax when they die, thus resulting in the proceeds going to the IRS instead of the beneficiaries. The best way to avoid this frequently overlooked mistake is to set up a life insurance trust to serve as the owner of the life insurance policies. Not only would this avoid hefty estate taxes on the insurance proceeds, it spares your spouse or children from having to wait months for the insurance pay-out.
If you are interested in learning more about the estate planning process and how it can benefit you, contact The Virdone Law Firm, P.C. In a free case evaluation, we can answer your questions and go over your estate planning options.