Avoid Common Estate Planning Mistakes
When thinking about estate planning, the idiom "an ounce of prevention is worth a pound of care" is appropriate. Creating an estate plan allows you to arrange for the well-being of your family and use your property to accomplish your goals while you are living and following your death.

November 03, 2011 /24-7PressRelease/ -- Avoid Common Estate Planning Mistakes

When thinking about estate planning, the idiom "an ounce of prevention is worth a pound of care" is appropriate. Creating an estate plan allows you to arrange for the well-being of your family and use your property to accomplish your goals while you are living, and following your death. Estate planning requires knowledge of federal and Ohio estate taxation, wills, methods of owning property and more.

Here are four common mistakes to avoid:

1. No Estate Plan

One of the most common mistakes is simply not creating an estate plan. Expensive litigation, undue tax consequences and family fights can result if you do not have a medical directive or will. A medical directive or living will allows you to control end of life decisions. A will clearly directs your personal representative how to distribute your assets. It also names the person who you want to care for minor children orphaned by your death.

2. Incorrect Beneficiary Designations

Retirement accounts and insurance policies allow you to designate the beneficiary of the policy and these accounts can be transferred outside the probate process. Beneficiaries of an account sometimes change, especially if the beneficiary is a former spouse, or if a named beneficiary predeceases you. You need to be sure that the correct beneficiary is designated. Complete a new beneficiary designation form to make any needed changes.

Naming your estate as a beneficiary of the death benefit from life insurance, qualified retirement plans and annuities may not be a good idea. These assets would incur probate costs, payout may be delayed and the assets will become subject to claims from creditors.

3. Failure to Gift Assets During Your Life

One easy way to reduce your taxable estate is to gift assets to relatives or friends during your lifetime. You may gift up to $13,000 tax free per individual in 2011, without the need to file a gift tax return. Additionally, you and your spouse could gift up to $26,000 to one child tax free this year through the use of a split gift. The exemption rate may increase in the future.

4. Not Accounting for Future Legislation

The estate tax has been hotly debated in the last few years and could affect your estate. Currently $5 million of an estate's value is excluded from taxation. Any assets in the estate over and above $5 million are taxed at a rate of 35 percent. However, proposals have been discussed that would reduce the asset limit to $3.5 million and increase the tax rate for assets above the limit to 45 percent. Major revisions would take effect in 2013 at the earliest.

For assistance drafting an estate plan, contact an experienced estate and trust planning attorney. An attorney will look at your individual circumstances and create a clear detailed plan after reviewing tax consequences with you and taking into account any possible affects that may occur from pending legislation.

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