Top 5 Mistakes People Make with Wills and Trusts and How to Avoid Them
Estate Planning Tips for Individuals & Families in Washington State
When it comes to estate planning, one may not realize that a set-it-and-forget-it approach can lead to unintended consequences for their loved ones. We’re outlining a few of the common mistakes we see when clients come to us so that you can avoid these yourself. We invite you to schedule a consultation with us to review your estate plan on a yearly basis or when a major life event has occurred.
1. Failing To Update Beneficiary Designations
One of the most common mistakes is failing to update beneficiary designations on retirement accounts, insurance policies, and other financial assets. Life events such as marriage, divorce, or the birth of a child often necessitate changes to ensure that the right individuals inherit these assets. Keeping beneficiary designations current is essential to avoid legal battles and ensure that assets are distributed according to your wishes.
2. Improperly Funding A Trust
Another common pitfall in estate planning is not properly funding a trust. Creating a trust is an excellent way to protect assets, but if property and accounts are not correctly transferred into the trust's name, it may be deemed ineffective. We invite you to contact our office to properly complete the transfer process and ensure your assets are protected in line with your plan. Additionally, regularly reviewing your trust for any needed updates as your financial situation evolves is key.
3. Ignoring Potential Tax Implications
Ignoring potential tax implications is a mistake that can cost your beneficiaries dearly. Proper planning can help reduce estate taxes and other liabilities, but this requires attention to federal and state tax laws. In Washington State, for example, estate tax exemptions differ from federal levels so it is particularly important to understand how to optimize your estate plan to minimize taxes. We help our clients navigate the complexities of estate taxes as part of our comprehensive estate planning service.
4. Choosing The Wrong Executor
Neglecting to appoint responsible or willing executors, or failing to select alternate executors or trustees can cause complications. It's wise to designate at least one backup to ensure your estate is administered smoothly. We help our clients have complicated conversations with loved ones on a daily basis, so if choosing an executor for your estate feels daunting, we can help.
5. Adding Children to your Bank Account or Home Title
A common misconception is that adding your children to your home title or bank account will make it easier for them to inherit these items after your death. However, that is not generally the case and it can even create problems during your lifetime. By adding children to your account or home title, you've gifted them legal ownership in your assets. By doing so, you will likely need to file a gift tax return. Additionally, your assets are now subject to all of your children’s legal conundrums including creditors, lawsuits, and divorce. Should you decide to sell your home, you'll need your child to sign off on the sale.
Every day we create solutions for our clients to simplify inheritance for their heirs while still protecting our client's assets during their life.
Avoiding these common mistakes not only helps ensure that your wishes are honored but also gives your loved ones peace of mind during what can be a challenging time. Contact our office for a complimentary consultation to discuss your personal circumstances.
The information provided in this blog is for general informational purposes only and is not intended as legal advice. Reading this blog does not create an attorney-client relationship. For advice regarding your specific legal situation, please consult a qualified attorney. The law is subject to change, and the accuracy of the information may vary over time.