Many people put off estate planning because they do not like to contemplate their own mortality. Those who do take the plunge often report that they appreciate the peace of mind that comes with knowing that they have a plan for what will happen if they become sick or incapacitated or should they pass away. When you plan your estate, there are a few common estate planning mistakes that you would do well to avoid.
Sometimes, the most difficult part of settling an estate is getting started. When a loved one passes away, their surviving family members may not know where to start looking for important things that they will need to wind up the affairs of the deceased. Looking through a recently deceased family member’s belongings in a frantic search for information that you need to plan their funeral, open their estate, or do other things related to the end of their life can be very stressful at a time when emotions are already running high. You can prevent that extra stress by creating an inventory of your assets and a list of where they can find essential items like your birth certificate, passport, burial instructions, bank account information, financial documents, online account passwords, and social security card.
If your estate plan contains one or more trusts, be sure that each trust has a schedule of the assets that you transferred into it. Since schedules get attached to the trust document, it is all too easy to look at a stack of papers, believe that it contains everything that it needs to contain, and move on. Check trust documents carefully to ensure that the appropriate schedules are not only attached but that they are complete and they list all of the assets that you intend for the trust to own.
Another common mistake that people make with trusts is leaving out the see-through provision if the trust is the beneficiary of an IRA. A see-through provision can be added to a trust that that meets specific legal requirements and the provision instructs the IRS to “see through” the trust as if it were not there and treat the beneficiaries of the trust like they were the IRA’s direct beneficiaries. This has two important benefits that would be lost without the see-through provision in place. For one thing, when an IRA has direct beneficiaries, the beneficiaries’ life expectancies determine the IRA’s required minimum distributions. Also, the see-through provision causes distributions to beneficiaries to get taxed at the individual beneficiary’s tax rate rather than the higher trust tax rate.
Many estate plans contain assets like bank accounts and investment accounts. These assets, if they have the proper designations, can be accessed by the beneficiaries without going through the probate process. Check each of your accounts to see whether it has a “payable on death” (POD) or “transferable on death” (TOD) designation on it. If you find one that doesn’t, ask your financial institution to help you add the appropriate designation so that your loved ones have immediate access to resources that they may need should you pass away.
If you have estate planning questions, call the law office of J. Joseph Weber, P.A. at 316-265-7802 for an initial consultation, or connect with us online. Our Wichita office is open Monday through Friday, from 8 a.m. to 5 p.m. We even offer some weekend and evening hours by appointment.