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Avoid These 7 Estate Planning Mistakes

July 12, 2019

End-of-life decisions are heavy and uncomfortable to think about, but they are something everyone has to confront at some point. We get that estate planning sounds like a tired financial topic. Yet, most people agree it is important. However, few people take care of estate planning matters when they think of it. 

According to a Care.com survey, 76 percent of respondents said it was important to have an estate plan but only 40 percent actually had one. Given how important estate planning is to your financial well-being, we cover this topic in exciting (yes, exciting!) detail on this week’s episode of The Money Guy Show!

Estate planning can seem like a complex undertaking, and not knowing how to approach it can lead to inaction. Lucky for you, you know us! And like any good friend, we are going to let you in on what we know. Pull up a seat as we share how to get your estate plan established well and the common mistakes people make that you won’t after tuning in to this week’s how.

Here is What You’ll Learn in This Episode:

  • The seven common mistakes people make when it comes to estate planning
  1. Not having the “BIG 3” components of a proper estate plan
    • Will or Trust
    • Healthcare Directives
    • Durable Power of Attorney
  2. Not having life insurance
    • 41 percent of Americans don’t have it, but 83 percent of respondents say they should! 
    • How to calculate how much life insurance you need.
    • Why we like term life insurance policies so much.
  3. Adding your name to a parent’s account 
    • This is well-intentioned, but don’t do it. It can create a host of tax problems for you. Instead, set up a revocable trust, power of attorney or simply get account view privileges so you don’t change ownership of the accounts.
  4. Giving highly appreciated assets to loved ones while you are alive
    • As parents get older they may want to offload assets such as real estate or appreciated stock. Even though this is noble, it is not the best solution due to the tax consequences. When it comes to highly appreciated securities the best thing is to hold on to them and pass with them. There are long-term tax consequences when you transfer highly appreciated assets to loved while you are still alive. The Money Guy solution is to gift cash instead, because it puts your loved ones in a better long-term tax planning situation.
  5. Not knowing how wills and beneficiaries work together
    • After you get your estate planning documents done, you may be super happy and excited and think that you’re done. However, beneficiary designation on your policies and accounts usurp what is in your estate plan so you have to make sure you update beneficiaries at the source!
  6. Not paying attention to the paperwork
    • It seems so obvious, but you make a great estate plan but don’t tell anyone! Don’t keep it a secret that you have this done, especially to the people named in your estate planning documents.
    • Why you want people to know about your healthcare directives and remember to reference them if you’re the one responsible for someone’s healthcare decisions.
    • Why you should immediately get an appraisal on inherited assets.
    • The horror that can happen if you don’t update your beneficiary designations!
    • The other important documents you need to keep updated and accessible to make it easier on the executor of your estate, like durable power of attorney and a net worth statement.
    • Why you shouldn’t keep utilities and accounts open in a deceased loved ones name. 
  7. Leaving a hot mess for your family and beneficiaries
    • The average executor spends 570 hours settling an estate! It can be this bad if you neglect setting your estate up properly. 

Resources and Research Cited in this Episode

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