You feel ready to plan your estate, but you have a lot to learn to create a thorough strategy. For instance, what mistakes should you look out for?
Kiplinger offers tips for avoiding estate planning landmines. Learn from others’ slip-ups rather than make your own.
Failing to plan for minor heirs and children
If you have minor children, ensure that your estate plan accounts for their care should you or the other parent die unexpectedly. Leave detailed instructions for how you want to spend the money you leave minor beneficiaries. Those instructions go to the guardian, the person you want to care for and raise your children if you cannot. No matter if you designate a close friend or relative as guardian, discuss your decision with the person to make sure that she or he accepts the role.
Not accounting for income taxes
Speak with a financial professional about assets you wish to leave that may incur income taxes for your loved ones. For example, an inherited retirement account may come with required minimum distributions, which may affect a beneficiary’s taxes. Consider shifting a standard IRA into a Roth IRA.
Going about asset ownership the wrong way
Do you own properties jointly with your spouse? Joint real estate ownership offers transferring and creditor safeguards that make shifting asset ownership more efficient after a spouse’s death. Meet with an estate planning professional to determine the most favorable way to deed real estate property and sidestep gift tax liabilities.
In the coming years, review your estate plan for costly mistakes. A lack of knowledge or preparation may cost you and your beneficiaries and heirs more than you realize.