Are you starting to think about your legacy and how you’ll pass it on to the next generation? It’s never fun to think about your own death. However, it’s too important to ignore. You may have a substantial amount of assets that you want to distribute to loved ones. You may have a spouse, children or other family members who are dependent on you for support. You might even own a business that could face hardship after your death.
All these issues require some level of estate planning. If you fail to develop a robust estate plan, you could leave your loved ones, business partners and others in a difficult financial situation.
Fortunately, you can protect those you care about with some simple planning. Wills, trusts and other estate planning documents can provide a significant amount of protection. Other tools, such as life insurance, can help loved ones overcome their biggest financial challenges.
Below are three common, but lesser-known, mistakes that many people make with their estate. If you can avoid these, you’ll have taken a big step toward protecting your legacy for your friends and family:
A will is the simplest and most basic of all estate planning documents. It provides instructions on who should receive which assets. It’s a powerful tool because it eliminates confusion, protects your heirs and reduces the chances for conflict and argument about assets after your death.
Even given all those benefits, though, 64 percent of Americans don’t have a will.1 That could be a big mistake. Without a will, your estate will be intestate. That means the probate court will decide who gets which assets and even who will serve as guardian for your minor children. The court’s decisions may not be in line with what you would choose for yourself. You can eliminate this risk with a will.
Too Little Liquidity
Dying can be expensive business. Your family will face final expenses and possibly medical costs related to your death. They may also face bills for long-term care that you needed in your final months. If you have dependents, they may face financial challenges related to the loss of your income.
There’s also the cost of settling your estate. Your heirs will likely have to pay legal and administrative fees during the probate process. They also may face a tax bill for your final tax return.
Many people make the mistake of leaving an estate that has few liquid assets. The estate doesn’t have enough cash to pay all of the outstanding expenses. Then the heirs are forced to sell assets that they’d prefer to keep, such as a family home or a valuable collection.
Don’t put your heirs in this position. Make sure your estate has liquid assets to cover immediate costs, such as cash or investments that can be easily distributed. Life insurance is also an effective tool for generating fast liquidity.
Your executor is the individual who is responsible for guiding your estate through probate and implementing the directions in your will. Although you will spell out your wishes in your estate planning documents, your executor still has latitude to make important decisions. For example, he or she can decide which assets to sell to raise liquidity and when to distribute assets.
The wrong executor could make decisions that benefit himself or herself at the cost of other heirs. He or she could create conflict and even legal issues among your family members.
If possible, try to choose someone who is not an heir to act as your executor. That way, they can be an impartial, objective administrator. If you must choose an heir as executor, try to choose the one you believe will act according to your wishes.
Ready to develop your estate planning strategy? Let’s talk about it. Contact us at Gregory Financial Group. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
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