People do make some mistakes in estate planning either because of procrastination or while ignoring the process. Hence, it becomes important to be aware of them beforehand to keep your loved ones stress-free.
Here are the major mistakes that you can make and must avoid at all costs.
- Improper planning
If you have not prepared or planned for a will, then it would be the worst thing possible. If you die without any will, then it will be quite difficult to decide who would receive your property. In the case of married couples, the surviving partner gets the right over the property of the deceased. Then, there are cases when the estate gets equally divided among the surviving spouse and children.
- Not updating major life events
The rules and regulations of the province where you reside affect your power of attorney followed by important estate planning decisions. Also, laws that are applicable in one state may not be applicable in another. There are cases when the couple must disclose their divorce to make their relationship transparent in eyes of law.
If not, then the spouse that they separated with will become eligible to own their property after your death. Hence, it becomes important to inform about your status legally if you don’t want things to turn unpleasant for your children at a later stage.
- Making a minor your heir
You cannot transfer your estate to a minor until he or she is 18 years of age. On his or her behalf, the guardian manages the property assigned. Sometimes, a custodian has to be appointed to avoid the expense and trouble of guardianship.
Click here to learn more about the importance of estate planning.
- Making your children ‘co-owners’ of property
Individuals usually include their kid’s name for avoiding probate. For example, if you have a brokerage account of $900,000 and out of your kids, you decide to make one of them as a joint owner, then the child who has been mentioned as a co-owner will be eligible for receiving the estate after your death.
The funds would not be divided equally amongst your children. If the child doesn’t survive, then the process of probate will come into the picture. Click this link to learn why estate planning is crucial: https://www.thebalance.com/top-reasons-why-you-need-an-estate-plan-3505444.
- Ignoring income tax
Federal estate tax laws have encountered a lot of changes in the recent times. Since the focus has shifted more towards making the estate taxable, it becomes significant to make effective estate plans. This will further help your beneficiaries to incur less estate taxes in the future.
Paying attention to the income tax factor is important to give your children peace of mind later. If you pass on a low basis stock to your kid, then he or she would have to bear the tax on capital gains upon selling that stock. However, if you keep the same stock until death, then your heir could sell it without bearing any taxes.
- Inheriting environmental liability
No heir would want to inherit environmental liability. While estate planning, it is essential to consider the liabilities if your estate has any contaminated properties as defined under the Environmental Protection Act.
The best thing to do would be to leave such contaminated property to trustees to limit the liabilities for maintaining legal ownership and continue to enjoy the benefits of the property. Also, the Environmental Law Update has to be considered before estate planning.
- Preparing for the latest rules
According to the latest regulations, people will not owe any estate tax at death. In the last 5 years, the exemption amount for estate tax has increased from $3.5 million to whopping $11.4 million for every individual.
Anyone who has planned well can benefit from reevaluating the terms. Fixing the issues persistent in the previous laws and updating them can save a lot of money in the future for your beneficiaries.
If you want your loved ones and your assets to be protected from legal hassles, then it is best to do estate planning as per the recent laws. If you fail to do this, then your heirs can face a lot of burdens including taxes. The courts would then decide how your assets would be divided. If you don’t want the entire process to be messy after your death, then it is best to take advice from the estate planner and have everything sorted.