There are several estate planning tools to consider and you can tailor their use to your particular circumstances.
You want to be as thorough as possible when you put your estate plan together. Here are four common mistakes for you to avoid.
1. Lacking liquidity
If you wish to divide your estate among your family members, liquidity is an important consideration. If you are passing your business along to your heirs, they must have the cash to begin operating it following your death. An easy solution is life insurance.
2. Forgetting about long-term care
The majority of people over the age of 65 will need long-term care. This could mean assisted living, nursing home or in-home health care, all of which are expensive. The solution here is to look into long-term care or disability insurance as soon as possible since rates will increase.
3. Ignoring tax consequences
Remember that tax consequences accompany certain assets that you wish to pass along to your beneficiaries. Required minimum distributions (RMDs) can apply to inherited accounts such as 401(k)s and IRAs. However, there are solutions. For example, as the original account owner, you can convert your traditional IRA into a Roth IRA. You will pay taxes at that time but then you will see tax-free growth. Thinking ahead means that after your death, your beneficiary can avoid taxes upon withdrawal.
4. Failing to update
If it has been some time since you created your estate plan, you should consider updating it. Any time there is a major life event such as divorce and remarriage, a new baby or relocation to another state, an update is in order. With legal guidance, you can bring your estate planning documents current and ensure there are no mistakes.