Five Common Estate Planning Mistakes

Often, when people are planning their estates they focus only their assets-who they will be passed down to, how they will be handled, and so forth. What these people typically don’t focus on is their health, including their likely longevity and quality of life.

Did you know that you can provide for a person to authorize a “Do Not Resuscitate” order in your lPower of Attorney for Health Care? This order designates that no further medical attention is needed if you are incapacitated without a hope for recovery. While you hope to avoid situations such as these, they are a possibility, and must be planned for.

When a person dies, his or her estate is subject to a number of different death and income taxes. Unfortunately, these taxes lessen the dollar value of the estate when it enjoyed by his or her beneficiaries.

While you may not be able to eliminate these taxes entirely, you can minimize them. This can be legally done in a number of sometimes complex ways. Giving a gift during life or through a trust, passing assets down as an inheritance, and transferring your life insurance policy to a trust are all typical ways to minimize taxes.

Did you know that you can get a federal tax exemption of up to $11 million, indexed for inflation, until 2026, and $5.5 million, indexed for inflation, thereafter? This one exemption, doubled for a married couple, can have a huge impact on taxes on your estate, reducing the total tax burden substantially.

Some states, like Illinois, have substantially lower estate tax exemptions. Illinois only has a $4,000,000 exemption, and it is NOT “portable” to a surviving spouse.

So, if your Illinois estate exceeds $4,000,000, and you just “let the chips fall where they may”, your heirs may be paying unnecessary tax at rates up to 40% of what they would otherwise inherit.

Life is ever changing, so it stands to reason that your estate plan should reflect life’s changes as well. Therefore, if you’re not regularly updating your will and/or trust, you may be making a mistake.

Divorces, births, deaths, and other such occurrences can drastically change the dynamics of your estate plan, designating assets to unintended beneficiaries. It’s wise to check up on the state of your will every 5 to 7 years to ensure that it’s still up-to-date.