We would like to suggest that our readers steer clear of these three common estate planning errors.
Error # 1: The assumption that you will never be exposed to the federal estate tax
As 2013 approached, the future of the estate tax was hazy. Unless some type of legislation was passed in the 11th hour, the estate tax exclusion was going to be reduced to $1 million in 2013, and the rate was scheduled to rise to 55%.
At the last minute, the American Taxpayer Relief Act of 2012 was passed changing these parameters to $5.25 million/40% (in 2014, $5.34 million/40%).
You never know about future legislation, and there are always those who want to raise more tax revenue so the exclusion could be reduced. And, your own financial situation could improve considerably.
You must remember that the value of your home does count toward your taxable estate, so you should always be aware of the current state of estate tax parameters.
Error #2: A failure to plan ahead for incapacity
Incapacity strikes a very high percentage of senior citizens, with 13% of those who are at least 65 being Alzheimer’s sufferers. This disease strikes around 45% of people 85 and older.
Incapacity planning is a must given the prevalence of Alzheimer’s alone, but Alzheimer’s is not the only cause of incapacity. Incapacity can strike even those that are not senior citizens, and planning ahead is essential.
Error #3: Buying into do-it-yourself estate planning sales pitches
People who try to save money by filling in the blanks on template legal documents often wind up losing far more than they thought they were saving. You would do well to ask yourself if you really want to entrust the transfer of everything that you own to those that are closest to you through a generic document that you downloaded off the Internet.