September 21, 2023

Epic Law

The Law Folks

The Most Common Estate Planning Mistakes

When it comes to estate planning, one needs to be meticulous or else you could end up with expensive financial losses. Unfortunately many people do not spend enough time planning their estate. Here are some of the most common estate planning mistakes that people make.

o The most common mistake is that people do have any plan at all or have improper plans in place. This leads to confusion and anger at the time of their demise when the surviving family needs to be united and supporting each other.

o The other mistake is misunderstanding the Tax Act of 2001, also known as EGTRRA. When the bill was passed, many people thought that estate tax has been abolished. However, this is not true. For 2009, the estate tax exclusion credit has been increased to $3.5 million and total elimination will only take place in 2010. However, financial experts believe that estate tax will revert to pre-2001 taxes and that is why any estate planning should take that into account.

o There are some who think that by transferring ownership of the estate to a close relative, they will be able to avoid probate. However, this exposes the estate to great risk especially if the co-owner is sued or files bankruptcy. This will allow the creditors to take charge of the assets in the estate and all could be lost in the bargain.

o Ever since the Tax Act of 1981 has come into play, there is 100 percent marital exclusion. This has prompted majority of the Americans to leave their entire estate to their surviving spouse. While this may look good, it is not at all part of good estate planning. If the estate has the potential to appreciate or is valued more than $4 million, the surviving spouse would end up paying unnecessary federal estate taxes and inheritance taxes.