Nearly everyone understands how important it is to take steps to protect the future of your loved ones. Without estate planning, your family will likely face overwhelming tax burdens and other unwanted consequences. You may also be leaving many of the decisions regarding your estate to the court instead of making them yourself. The first step is creating a will and here are five mistakes you can avoid.
What is required when creating a will?
A will is a written legal document that provides instructions on exactly how you want your estate to be distributed after your death. Wills are very useful estate planning tools that can be modified or canceled at any time while you are still alive. There are several basic provisions that you can consider including in your will. However, there are also some simple mistakes that can create more serious problems in the end.
Mistake No. 1: Be sure to update your will
For anyone who has experienced a major life change, such as the birth of a child, the death of a family member, marriage, divorce, or a significant change in financial circumstances, then you should definitely review your will. If you fail to make necessary changes, there will most likely be unintended inheritances or unnecessary tax consequences left for your family.
Mistake No. 2: Remember to plan for estate taxes
When creating a will, you cannot afford to overlook potential estate tax liability. One of the most frequently made mistakes when creating a will is assuming that your estate will not be worth enough to incur estate taxes. The reality is that, even some property that may not be included in your estate may still be taxable. Certain assets, like life insurance proceeds, trusts, and retirement plans may still be included in your estate for tax purposes. Be sure to discuss your potential estate tax liability with your estate planning attorney so you can be prepared.
Mistake No. 3: Be sure to appoint an executor
An executor is the person who will be responsible for administering your estate in compliance with the terms of your will. This choice should be taken very seriously so consider someone you believe will be trustworthy, organized and reliable. You must also consider nominating a successor as well. In the event your selected executor is unable to serve in that capacity for any reason, having a successor will be the best solution. If you determine after first creating your will that your executor and/or your successor executor cannot serve, then you need to modify your will.
Mistake No. 4: Remember to include all of your intended beneficiaries
When first creating your will, be sure to give careful consideration of who you name as beneficiaries because the terms of your will control the distribution of your estate upon your death. If you intend to leave a specific heir out of your will, then you must be very clear in doing so. Providing your reasoning for disinheriting someone is a good idea because it will prevent challenges to your will after your death, when you can no longer explain your intentions.
Mistake No. 5: Be careful to dispose of all of your estate’s assets
Why is it important to make sure all of your assets are disposed of by the terms of your will? Because any property that is left out of your will, or some other estate planning tool, must be distributed instead by the probate court. That is because the law considers you to have died partially intestate. The best way to avoid this situation is to include a residuary clause. The purpose of this provision is to ensure that your assets are distributed to your beneficiaries and not taken by the state. A residuary clause will provide for the distribution of any remaining, or “leftover” assets to the person you name as the residual beneficiary.
Another potential mistake would be to use an online will
Before you decide to substitute an online will for professional advice about your estate plan, you should understand the general risks in doing so. While the risks are much higher in complex legal matters, most of the mistakes that occur with DIY wills relate to how the document was drafted and executed. So, when it comes to creating a will, you may want to avoid do-it-yourself products.
Download our FREE estate planning worksheet today! If you have questions regarding creating a will, or any other estate planning needs, please contact the Schomer Law Group for a consultation, either online or by calling us at (310) 337-7696.