Estate Planning Mistakes to Avoid

June 1, 2012

Estate planning can be complicated and stressful. Trying to make the right decision for you and your loved ones can be a difficult process. Assuming that you have committed to creating an estate plan, make sure you don’t make any of the following common mistakes.
Gifting Too Late. If you have a substantial estate, you may not want to wait until the last minute to start gifting assets. Waiting until your death may subject your estate to hefty estate taxes. If you start years before your death, you can make small gifts each year free from gift and estate taxes. You may also be able to incorporate trusts and other estate planning tools into your plan to reduce tax exposure.
Gifting Too Early. On the other end of the spectrum, don’t give everything away to beneficiaries who are ill prepared to handle it early on. Create trusts or slowly gift assets so that your beneficiaries can adjust to the money they are inheriting.
Too Much Control. While it is perfectly understandable that you want to retain a certain degree of control over your wealth after it has been passed down, too much control can create resentment and can thwart the purpose of your gift. If you create a trust, for example, make sure that you leave some room for discretion on the trustee’s behalf since there is no way to foresee the future. If the gift has too many strings attached, the IRS may not consider it to be a gift at all.
Too Little Control. Again, don’t go too far in the other direction either. Make sure that you give your trustee some broad guidelines to work from. At a bare minimum, make your distribution schedule clear.
Not Enough Planning. Over planning can cause "paralysis by analysis." Get the process started even if you haven't resolved all the imponderables such as what happens if a beneficiary who is now 9 years old later marries the wrong person or attends the wrong college. Plan early and revisit your plan regularly. As life changes--either for you or for your beneficiaries--those changes often require changes in your estate plan. Review your plan annually and every three to five years with your estate planning attorney.

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