There are certain estate planning mistakes people make that can cost one a significant amount of money. Here are three common mistakes to avoid:
The most common estate planning mistake to avoid is failing to plan at all on the event you pass away. When you die intestate (without a will), the state of New York will determine who receives your assets that you have earned a lifetime to accumulate. In other words, under the laws of intestacy, your next of kin will inherit your estate.
While this may not be a problem for most people, for some this can present a problem because there may be spendthrift or irresponsible relatives who would stand to inherit a significant sum of money. It is for this reason that it is crucial that you speak with an experienced estate planning attorney so you can clearly map out how you want your assets to be distributed, and second, who should be the fiduciary in charge of your estate matters (executor).
The second common estate planning error is failing to take advantage of the annual gift tax exclusion and lifetime exemption so as to reduce your taxable estate. In 2014, an individual can gift up to $14,000.00 ($28,000.00 for a married couple) to as many people as they want without imposing any gift tax liability upon themselves. Further, one can gift up to $1 million in their lifetime (notwithstanding the previous exemption amounts) without incurring any gift tax liability.
This key strategy ultimately serves to reduce the New York estate and federal estate tax liability one may be forced to pay. One should gift to their loved ones during their lifetime to prevent the government from taking more money from your assets that you have worked a lifetime to accumulate.
The third common mistake people make is to nominate a trustee or successor trustee to an irrevocable trust for whom you do not completely have faith in their competency or fiduciary skills. Unlike a revocable trust, once an irrevocable trust is signed and takes effect, you as the grantor cannot amend the terms. Terms such as who the trustees are, the powers of said trustees, or the beneficiaries. This is why it is of utmost importance to choose the trustees wisely. In some instances, a corporate trustee such as a financial institution may be the more prudent decision for the grantor of said trusts.
If you would like to discuss your estate planning needs, please contact an experienced estate planning attorney at the Law Offices of Michael W. Alpert by calling (631) 225-4603 or contact us via email today.