Many Camden County couples preparing their estate plans utilize the assistance of a financial advisor to prepare important documents. However, it is important for individuals and couples to not only provide accurate information to their financial planner, but to also carefully review the information on the documents.
While, financial planners work hard with their clients to ensure accuracy, they are only human and mistakes can be made. It is best to be proactive and work closely with your financial planner to make sure that your estate plan is laid out how you and your spouse envision. Some advisors have provided tips for consumers of common errors to be on the lookout for in their estate plan.
The first thing advisors recommend planners to watch for is accurate beneficiary designations. This type of information is often overlooked after a couple divorces or a death or birth occurs in a family. It is important to remember as life changes, so should your beneficiaries.
Another common mistake made by financial planners is an assumption of what their client’s end goal is on their estate plan. One example provided illustrates that some clients may be concerned with their heirs ability to manage and inheritance. Instead, their financial planner may have designed their plan to take advantage of estate tax reductions. Remember, communication is key! Talk to your financial planner about what it is you envision your estate plan to do in the end.
Other hot tips advisors recommend clients to be aware of are the following:
- Choice of executor and trustee — are your choices the best choices?
- Failure to document medical directive intentions — could the documents you have conflict with one another? For example, a health-care power of attorney and a living will
- Asset protection — discuss what strategies are available to preserve the estate you’ve worked hard to build with your advisor
- Naming minors as account beneficiaries — it is wonderful to provide for children and grandchildren, but if they are minors they need someone to monitor their inheritance until they are an adult
Lastly, it is important to know what your estate is worth and whether or not it falls under the exemption amount to avoid hefty state estate and inheritance taxes. While many states allow a $5 million taxable exemption, states like New Jersey have their own rules. Any estates over $675,000 that do not go directly to a surviving spouse are subjected to the state’s estate tax.
Regardless of the size of your estate, it is important to have a plan established for what and to whom you want it to go. Talk to your financial planner about what you want and be an active part of the process.
Source: Life Health Pro, “8 Estate Planning Mistakes to Avoid,” Ed McCarthy, CFP, Mar. 1, 2012