Over the next 25 years, one of the largest wealth transfers in U.S. history is set to take place as nearly $68 trillion is forecast to be given to future generations.
The enormity of this amount promises unique opportunities for beneficiaries, especially for estates that are appropriately managed in an ever-changing environment over tax and legal requirements.
Protect yourself against these estate planning blunders
The key to passing along as much of your wealth as possible is working with an experienced estate planning attorney. A knowledgeable lawyer can help you avoid these common mistakes:
- Naming minors as beneficiaries: Listing young children or grandchildren can have severe repercussions if you die while they are still minors. In New York, children under age 18 cannot control money or property left to them in a will. Unless you designate someone you trust as their guardian to manage the funds, the court will select a guardian to oversee the funds on their behalf.
- Failing to name beneficiaries: Not designating beneficiaries for accounts outside an estate plan, such as retirement funds, investment accounts and insurance policies, means those assets will likely go through the time-consuming and costly probate process. This can lead to frustration and family disputes.
- Not funding a trust: Creating a trust can be an efficient way to pass along your wealth to future generations and others. However, some individuals fail to include instructions on how to fund them when they die. This may consist of changing ownership of bank, investment or insurance accounts to the trust. If unfunded, a trust is typically disregarded, and assets go through probate.
- Creating tax issues for heirs: Under the SECURE Act, non-spouse beneficiaries must fully withdraw proceeds from a 401(k) or traditional IRA within 10 years, which can create an enormous tax burden. One way to avoid this is by converting those assets to a Roth IRA in your lifetime. You’ll pay taxes at your current rate, but your children and grandchildren will receive their shares tax-free.
But, the biggest estate planning mistake is….?
You guessed it! Not having a plan at all, or not devising a strategy that meets you or your family’s specific needs. Thinking about the end of one’s life is not easy, and it can be overwhelming even to contemplate your legacy. However, spending some time with an experienced estate planning attorney can not only positively impact your family for generations to come but give you peace of mind for the rest of your life.