Wednesday, April 16, 2014
Common mistakes made on an estate plan can be costly. Some errors can compromise what your heirs inherit when you die, and other mistakes may leave you vulnerable if you become incapacitated. To ensure your estate does not fall victim to predators, creditors, or taxes, avoid these 5 estate-planning oversights:
- Choosing Unwisely. A large part of your estate plan is selecting durable power of attorney and medical power of attorney. It is crucial to carefully appoint these individuals, as you are literally putting your life in their hands.
- Leaving Your IRA to Your Estate. Naming your estate as your individual retirement account beneficiary will subject it to claims and creditors during probate. Your entire IRA could be used to pay any outstanding debt or loans. However, by naming a live person as the IRA beneficiary allows those assets to escape probate and creditors.
- Neglecting to Revise Beneficiaries. This is imperative especially where IRA beneficiaries are concerned. If you forget to change the designated beneficiary to your IRA, the person named to your IRA is legally entitled to that asset when you die.
- Foregoing a Health-Care Directive. Failing to create an advance health-care directive, or living will, can be detrimental as it lets your family, physicians, and friends know your end-of-life preferences. This simple piece of paper saves your family the emotional angst of guessing your wishes in an already difficult time.
- Leaving a Living Trust Unfunded. A living trust allows you to pass assets to heirs outside probate but proves useless if you fail to put assets into the trust. “Once you set up a living trust, you must retitle your assets under the name of the trust.”
See Shelly Schwartz, The 5 Biggest Estate-Planning Blunders, CNBC, Apr. 14, 2014.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.