You don’t need to be super-rich to benefit from a well-crafted estate plan. However, it’s crucial that it’s done correctly so you can take care of the people close to you.
A basic estate plan consists of three main documents – a will, a health care proxy and a durable power of attorney. The final two designate others to handle financial and medical decisions when a person is incapacitated.
Avoid these costly errors
Estate planning can be complicated, especially for high-asset individuals. But some mistakes happen too often keeping a person’s wishes from being carried out, including:
- Lack of an estate plan: Statistics show only four out of every 10 American adults have an estate plan. Those without a will or trust leave it up to the state to decide who receives their assets.
- Failing to name or update beneficiaries: Insurance policies and retirement accounts aren’t included in a will. A person or trust must be designated to receive the funds. The failure to update beneficiaries means the assets may go to the wrong person.
- Inaccurate joint title: Married couples can both own assets and not understand there are two types of joint ownership – Joint Tenants with Rights of Survivorship, which bypasses a will, and Tenancy in Common, in which a surviving spouse’s share is dictated in each party’s will.
- Not funding a revocable living trust: This trust allows a person to freely move assets in and out of the trust while they are alive. However, a common mistake is failing to transfer or retitle assets to the trust, leaving nothing to distribute upon their death.
- Naming a trust as beneficiary of an IRA: The SECURE Act, which went into effect this year, removes the “stretch IRA,” a provision that formerly allowed non-spouse heirs receiving retirement funds to spread out payments over their lifetimes. The new law limits a full payout to 10 years.
Protect your legacy and your family’s future
Regardless of the components of your estate plan, your goals are to distribute your assets to loved ones or others you’ve chosen, minimizing tax liabilities and reducing the legal expense. You also want to designate someone you trust to handle your medical or financial affairs if you are unable to do so.
An experienced estate planning attorney here in New York can customize a comprehensive plan to meet your needs to make sure your wishes are carried out and that your assets are preserved for later generations.