How To Avoid Costly Estate - Planning Minefields
How To Avoid Costly Estate-Planning Minefields
6 Costly Estate-Planning Minefields, And How To Avoid Them
Over the years many celebrities have provided cautionary estate-planning lessons, and actor James Gandolfini, who died in June 2013 at age 51, is no exception. The actor, known for portraying mob boss Tony Soprano, left a portion of his estate, widely estimated at $70 million, to relatives and friends through his will, which became public and was criticized as being badly constructed. For one thing, it exposed some of his wealth to probate, the time-consuming and potentially costly process a legal court takes to administer financial affairs. In addition, his estate could owe millions of dollars in federal estate tax alone.
At least Gandolfini had an estate plan; fewer and fewer Americans do. In 1998, 61 percent of Americans 55 and older had a will or trust. In 2012, only about 54 percent did, says a study by Texas Tech University. Failing to take action or making the wrong moves can be costly for you and your heirs. Here are six blunders experts told us they see most often, and what to do instead:
Minefield No. 1: You Think You’re Too Young For A Will Or Don’t Have Enough Assets To Protect
A good estate plan can save your heirs some money; it also protects you and your family while you are alive. If you don’t have a plan and you become incapacitated, someone will have to go to court to be named your guardian so that he can make medical and financial decisions for you. The process not only is unpleasant but also could easily cost $10,000 or more, says Martin Shenkman, a New York City attorney and certified public accountant. If other family members object, the process could drag out, which will cost more and could leave your bills unpaid or delay needed medical treatments.
If you die without a plan, you’ll also have no control over who becomes the guardian of your minor children or who gets your assets. “A lot of people assume that if they do nothing, everything goes to a surviving spouse,” says Deborah Cohn, an estate-planning attorney in Bethesda, Md. Instead, your property will pass to your survivors based on your state’s laws of intestacy. (You can find links to your state’s rules here.)
And if you have neglected to name beneficiaries on accounts that need them, such as retirement, life insurance, and brokerage accounts, the companies that manage those products have a default rule in their contracts’ fine print that spells out how your assets will be distributed. “It might say it goes to your surviving spouse, but it might also say it goes into your probate estate,” Cohn says. “Then your state’s intestacy law make those decisions for you, and money will be depleted to pay for probate.”
Steer clear. Get a basic estate plan in place. You’ll need a will, which states who you want to inherit any property that does not have a designated beneficiary, and name a guardian to care for young children.
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