There are two general mistakes that Minnesotans tend to make when it comes to estate planning. They either put it off until it is too late, or they put an estate plan into place early but forget to update it after major life events occur.
It is important that Twin Cities area residents have updated, clear and intentional estate plans. When they fail to do so, this can lead to one's assets not being distributed as one wished--as well as disputes and turmoil among surviving loved ones.
- Not thinking out the terms of an inheritance for a child: Many parents chose to leave money to their children, and trusts are a good way to do so. Trusts have a number of benefits, and one of them is the control trusts provide the testator. It can be stipulated that a trust is to be used for education, for example, or that it will not be paid out until the child is a certain age. Or, if it is a large sum, it can even be dispersed in pieces at different times--at age 18, 25, 30, etc. Trusts are a important estate planning tools, but they can lead to unintended consequences if they are not well thought out. So, it is wise to discuss these thoroughly with one's attorney.
- Failing to think about various scenarios: An estate plan should cover all of your bases. People often think of an estate plan as the plan of how their assets will be distributed after death--but there are a number of different contingencies to account for. What if you and your spouse die at the same time? What if you and a child die at the same time? What if the people you list as your child's guardian die at the same time as you. These are not fun things to think about, but estate plans should address these and other what-ifs in order to avoid unintended consequences.
- Neglecting to consider taxes: Estates can be greatly affected by taxes. Estate plans can be set up so that estate taxes are paid before any assets are distributed, or so that beneficiaries and inheritors pay taxes after receiving a distribution. It is important to talk to your attorney about how your estate might be effected by taxes.
- Failing to communicate: It is important to tell your loved ones that you have an estate plan and to give them an idea of what it contains. In some cases, parents do not tell their children that they have life insurance policies, for example, and as a result those benefits are never paid out.
Many people put off estate planning because it can be uncomfortable to think about death. However, communicating your intentions and updating them as things change can allow your final wishes to be honored as well as prevent disputes among your loved ones.
Source: Fox News, "Duck Estate Planning Fiascos Before It's Too Late," Sheyna Steiner, May 13, 2013