10 common estate planning errors
March 30, 2018 | TS Prosperity Group
Wills, executors and life insurance can be a depressing topic, however, it is crucial to have your affairs in order for a time when they might be needed. Below you will find 10 common estate planning errors commonly made. Here at TS Prosperity Group we believe it is important to plan ahead not only for you, but also, for your loved ones.
- Improper use of joint tenancy property
It is not unusual for a parent to add a child’s name to his/her bank accounts for the convenience of access to the accounts. The danger in this plan is that upon the parent’s death, all the funds immediately belong to the named joint tenant with rights of survivorship. Those funds do not get divided among other heirs.
- Improperly Arranged Life Insurance
Beneficiary designations should be periodically checked by the owner of the policy. Particularly in the case of a paid up policy where there may not be any correspondence from the insurance company for several years, be sure to review the named beneficiary when there has been a major life event—marriage, divorce, birth, death, etc.
- Lack of Liquidity
At the time of death, there are generally cash needs that occur for things like last illness, funeral expenses, and perhaps legal fees and taxes. Where an individual’s wealth is all tied up in a business or farming operation, for example, it is important to have access to cash to avoid having to sell income producing assets. This may be a challenge when you have heirs working in the family business and heirs that are not. One option is life insurance to cover these cash needs.
- Choice of Wrong Executor
Naming someone to be your Executor is no honor, and must be done carefully. The gathering and disposition of a person’s assets can be a job that takes a long time and requires a lot of work. Where probate is required, that individual works with a lawyer and may be required to arrange for the preparation of final tax returns, sell real estate, and probably the most difficult of all tasks, deal with beneficiaries. Choosing the right executor is crucial to ensure your final wishes are carried out the way that you wanted.
- Will Errors
Many states allow people to write their own wills. But paying an attorney for this service may eliminate the danger of misusing certain words or not dealing with the final payment of expenses and taxes. An example of this might be in the case of a family where the parents leave their property to the surviving spouse and then to children. But do they take that one step further in the case of a catastrophic death where all family members are killed?
- Leaving Everything to the Surviving Spouse
Even after many years of a long and happy marriage, there may be reasons why a person would not want to leave everything to a surviving spouse. Under the current tax laws, all assets in the surviving spouse’s name may trigger estate tax at a rate of 40%. If the marriage was a second marriage for either spouse (or both), heirs may be unintentionally disinherited. Or, if the spouse is a spendthrift, there are ways to control access to the funds to protect the surviving spouse.
- Improper Disposition of Assets
None of us know exactly what we will be worth or what we will own at the time of our death. It is important to periodically review and update, if necessary, your estate plan to make sure that it accomplishes your goals and objectives. And, once again, if there is a major life event—birth, death, marriage, divorce, disability—it is time to review your estate plan.
- Failure to Stabilize and Maximize Value
At least annually reviewing your assets helps to keep your eyes on the changing economic environment. A misstep by a company, such as Enron, can turn a healthy portfolio into one with little or no value. It is important to diversify your assets so that the value of your estate is not dependent on one or two holdings.
- Lack of Adequate Records
It is helpful to your family to have your affairs in order so when the time comes for them to take over, they know where your important records and papers are and that they have access to them. Many people rely on safety deposit boxes to store the important papers, but be sure that someone other than yourself has access to the box. Keep past tax returns, records of stock purchases, death certificates, social security numbers, military records, marriage licenses, etc. in a safe and accessible place. They will be needed as someone takes over your affairs.
- Lack of a Game Plan
A favorite saying of mine is “none of us know how the day will end” but having a plan in place for the way things are at the beginning of the day is a good start to following through with your goals and objectives. Things change and life throws us curves. But in the long run, it is much easier to alter an existing plan than to create a plan at the last minute or in time of a crisis.
At TS Prosperity Group, we IGNITE PROSPERITY® by helping our clients do more with their money. Whether it’s saving a little extra cash each month or accomplishing a long-term strategy, our goal is to help you transform your financial life. Call and schedule an appointment today, one of our team members would love to help you do more with your money at TS Prosperity Group. TS Prosperity Group is based in Council Bluffs, Iowa, with clients across the midwest. For more information visit tsprosperitygroup.com or call 844-487-3115. #igniteprosperity
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Mary Jewell
Fiduciary Officer, VP, JD
Mary Jewell serves as a Fiduciary Officer and Vice President for the TS Prosperity Group. She began her career with TS Bank in 2012. Prior to working at TS Bank, she was an agricultural estate-planning specialist for Farm Credit Services and spent 12 years as a trust officer for another regional bank. She spent four years as a planned giving officer for a public foundation and shares her expertise with the Treynor State Community Foundation. She also raised funds for a local non-profit. Mary received her undergraduate degree from the University of Nebraska-Lincoln and her Juris Doctorate from Creighton University. She stays busy with her family of six children and volunteers her time at the Joslyn Castle, the New Cassel Foundation Board, and the Center, in Council Bluffs. She is a member of the Omaha Estate Planning Council and the Nebraska State Bar Association.
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