There are few things as important as your estate plan when it comes to your legacy and what you’ve worked for all your life. Throughout your life, you may have been the voice of reason and you may have doled out financial help now and then for loved ones who were not quite as financially savvy. So when it comes to your departure and the continuation of care for those same loved ones, you want to also extend your reach as the adviser and disallow for any less savvy loved one to squander their money all at once.
The type of estate plan you craft can absolutely work to prevent such an occurrence and you may be relieved to know that you can still look out for loved ones long after your physical self has passed on.
Even if you are brilliant with your finances and have done well for yourself throughout your life, you may find there are a few pitfalls that you must avoid when it comes to the one-time event of bequeathing your estate.
Some standard pitfalls even the most savvy financial minds neglect are:
- Letting your share of the estate go solely to your spouse. Sure, you can avoid estate taxes, but the estate will be heavily taxed with substantially less exemptions when your spouse passes, diminishing an estate that may have otherwise grown substantially in value.
- Not creating an estate plan. Even if the estate doesn’t seem to be high value, its worth can quickly add up when you figure in insurance, retirement and rising home prices. Not to mention, if you don’t dictate a plan, the state will.
- Failing to take advantage of the $10,000 tax exclusion for gifts. While you are still alive, you may be able to avoid future taxation by gifting up to $10,000 annually per recipient.
There are numerous other pitfalls that can occur if you are not working with an estate planning attorney. Like a financial adviser, an estate planner can caution you against pitfalls and ensure the future of your loved ones is still protected in some way, even after you are gone.