The omission of a critical step or the commission of an error might derail your meticulous preparation, presenting your heirs and beneficiaries with a headache-inducing obstacle.
Everyone must have an estate plan; it goes without saying. Consider your arrangements carefully; whether you make a basic will or engage with a probate professional to form a complex and complicated trust, the better the outcome will be for your heirs and beneficiaries.
But your meticulousness and forethought might be undone if you omit an essential step or make a mistake. You might instead burden your heirs with a difficult and headache-causing estate.
These are the most frequent errors.
Not preparing for inability.
We make wills and trusts because we know we will perish one day. We want our survivors to know how our property and other assets should be distributed. However, what will occur if we become incapacitated? Will our loved ones be aware of our final wishes?
It is easy to overlook that situations other than death might impair our decision-making capacity. A well-considered estate plan should also provide for these sorts of occurrences. It should identify the individuals allowed to make essential choices on your behalf — about finances, medical care, and other crucial things — and include the necessary powers of attorney. Once you lose consciousness or develop dementia, it will be too late. Create a list of decision-makers, express your desires to them, and draft the required powers of an attorney immediately.
Leaving out funeral and burial requests.
Include this information in your estate paperwork if you have the forethought and money to acquire a burial site and make funeral arrangements. Do not assign your children the task of searching for this information. If you have not already done so, you should include your desires in a will or trust. Failure to do so will leave your family with many issues to resolve after your passing.
Do not assume that your executor will be responsible for making these choices. Assign a point person to be in charge of funeral and interment arrangements, and make sure that person understands your intentions. If you neglect to detail your wishes before your death, it may become a problem for the probate court to settle, severely delaying your burial.
Different states have different burial laws. In the state of Texas, funeral decisions must be allowed by the next of kin regardless of who is designated as the executor. For instance, a deceased individual whose children survive cannot be cremated without their consent. Acquaint yourself with the local legislation and take immediate action to prevent interfamilial conflict.
Not considering the tax ramifications of a property transfer.
Death and taxes may be unavoidable, but death-related taxes are not. As kind as it may appear to transfer property to your heirs during your lifetime, it is typically considerably more prudent and charitable to defer the transfer until after your death.
When you transfer a property’s deed to your next of kin before your death, they may be subject to a substantial tax charge when they sell the property. This is because the foundation for the home, ranch, or apartment will be based on the date of purchase, not the date of the gift. This might leave your heirs scurrying to pay a significant sum that could have been avoided if they had received the deed after your passing.
Not identifying alternatives for decision-makers.
When tragedy strikes, the best-laid plans may go astray. You should have designated a secondary beneficiary, and secondary beneficiaries should be designated in case of death by accident, fire, or natural disaster if both die simultaneously. Identify additional/alternative beneficiaries and a contingency plan to deal with such unanticipated and unpleasant circumstances.
Specify alternates for your executor and other decision-makers. If they cannot execute their responsibilities due to death, disability, or other circumstances, a court will appoint replacements unless you have made alternative arrangements.
Take care of this immediately and with care. It is much simpler to prepare for the unknown in good physical and mental condition.
Not maintaining beneficiary designation records.
It may appear simple, but dividing an estate among beneficiaries may be difficult. Consider, for example, a person who intends to distribute equal shares to his children. The will may stipulate that each kid receives a specific proportion.
If, however, a single kid was inadvertently designated as a beneficiary on death to a bank account or for another reason, the child will be the sole beneficiary of the account regardless of the will.
In addition to listing the beneficiaries and their proportionate shares in your will, you must also provide your bank with a directive outlining the interests in your account following your passing. If you fail to do so, the bank’s rules will supersede anything you have written regarding that account, resulting in your entire estate being distributed in proportions that differ from those stated in your will.
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All the errors we’ve discussed can be corrected early in the planning phase.