As estate planning attorneys, we talk with many people who come to us with their problems, their concerns, and many misconceptions about what will happen if they become disabled or die. We all get information from television, newspaper or magazine articles, the Internet, and our friends and family. While much of the information we gather is correct, some of it is just not. And, even when the information is correct, if it is taken out of context or applied to a different situation, it can be just as bad as if it were wrong.
This article and next month’s article will highlight some of the most common misconceptions and mistakes people make when planning. We’ll list them in a Top Ten countdown format. Drumroll please…
- Failing to understand how your assets will pass upon your death. What happens when a beneficiary designation on a life insurance policy names one person, but your Will names someone else to inherit your assets? Or what about that bank account that you added your daughter’s name to so that she can help you pay your bills – who gets it after your death? Will it be your daughter, or all of your children who you have named in your Will or Living Trust?
- Thinking that a Will avoids probate. If you have a Will, think probate won’t be necessary? This is not true. Instead, think of a Will as a roadmap to probate – it may make the process a little smoother and less expensive, but it won’t avoid it.
- Failing to understand that your surviving spouse can change your agreed-upon final disposition plan. If you leave everything outright to your husband or wife (whether through joint ownership, beneficiary designations, or your Will or Living Trust), he or she will be able to do whatever they want with those assets after you’re gone, including not leave them to your children.
- Failing to consider estate and income tax consequences of your estate plan. For estate tax calculation, you must include life insurance and retirement accounts, as well as real estate, stocks and bonds, cash, and other assets, whether held in your own name, joint tenancy or in your Living Trust. Even if you don’t have a taxable estate, you still need to consider the income tax consequences of your planning, including deciding on the beneficiary designations for your IRAs and other retirement accounts, and deciding to sell or gift appreciated stocks or other assets, or keep them until death.
- Thinking that gifting $14,000 per year is fine for Medicaid purposes. Many people know that they can give away up to $14,000 per year to each of their children, grandchildren, etc. without any negative gift or estate tax consequences. Such gifts can, however, cause unexpected problems if the gift-giver needs long-term care and Medicaid assistance to pay for such care, because the Medicaid gifting rules are quite different from those for federal estate and gift tax purposes.
Should you have any questions about estate planning or would like to schedule a free initial consultation, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800 or contact us online.
Waltz, Palmer & Dawson, LLC is a full-service law firm with various areas of service to assist your business, including: Employment Law, Intellectual Property, Commercial Real Estate, Business Immigration, Litigation and general Business Law services. Individual services include Estate Planning, Wills and Trusts, Probate, Guardianship, Divorce and Family Law, Collaborative Divorce & Mediation.
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