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Putting one’s affairs in order has never been easy or pleasant, but this should be done regardless of your current age. We all agree that basic preparation has tremendous value to our loved ones during their time of grief.
If you feel your affairs are not in order and would like assistance with this task, we can help. As a member of your planning team, we will work with your personal attorney, certified public accountant and trust officer as a catalyst and initiator of ideas. You are also encouraged to utilize the agency’s comprehensive financial and insurance review service — so there are no questions about your financial future.
To take advantage of this service and our experienced staff, call us toll free at 1-800-375-6664 or through one of the other options available on our Contact Us page. Peace of mind will be your reward for putting your affairs in order.
Estate Planning is defined as the process for the accumulation, conservation, and distribution of estate to most efficiently and effectively accomplish tax and non-tax objectives. Listed below are the most common estate planning pitfalls. As part of your estate planning team we can help you avoid these and other estate planning mistakes.
The Ten Pitfalls of Estate Planning
All estate plans should be checked against the following ten “pitfalls”. Although there are more than ten pitfalls to avoid, it is doubtful that any others could do more damage.
- Failure to Make a Proper Will and Revise It Periodically – By failing to prepare a will, a decedent surrenders the right to distribute his or her property and allows the state to take over that task. Even after a will has been prepared, it may be seriously outmoded at death unless reviewed periodically.
- Lack of Flexibility in Planning – A will must be drafted with enough flexibility to permit heirs and beneficiaries to meet emergencies or changing needs. Ideally, a will should take into account not only current family requirements but also future needs. Planning for the future, however, should not override basic necessities. For example, a decedent may provide for a child’s college education without permitting proceeds to be diverted for any other purposes. At death, the will may prevent the family from using the proceeds for any purpose other than college, although the money is desperately needed for food and shelter.
- Not Enough Liquidity at Death – If an estate plan does not provide enough cash to cover final expenses, valuable assets may have to be sold immediately, frequently at a fraction of their value. Thus, estate shrinkage must be taken into account when preparing an estate plan. One solution is life insurance, which will automatically provide the required liquidity at death. In addition, life insurance proceeds are not subject to estate tax.
- Failure to Plan for Disposal of Business Interest – Intelligent planning can provide a guaranteed buyer for a business interest at a guaranteed sales price with assurance that money will be on hand instantly when death occurs. Another option is for heirs to continue the business. Advance planning will give them the best possible chance of succeeding.
- Failure to Arrange and Integrate Life Insurance with Other Assets – Life insurance policies should be checked periodically and integrated with other assets, such as Social Security and stocks and bonds, to form a cohesive plan. Policy settlement options should be considered, thereby permitting proceeds to be paid in monthly installments.
- Failure to Take Advantage of Tax Saving Mechanisms – Estate plans should be reviewed annually to make sure that any tax law changes are reflected in the plan and to take advantage of any new tax saving method. In fact, any properly drafted estate plan will strive for the greatest tax savings possible. Every dollar that escapes tax results in an additional dollar for estate beneficiaries.
- Failure to Plan for Retirement – Retirement plans and goals must be specifically identified. Unless such plans are known, an estate planner cannot determine whether sufficient funds are available to accommodate retirement desires. Retirement planning and the next pitfall are interrelated.
- Over-dependence on Government and Business Insurance and Pension Plans – Social Security and pension benefits may be considerable, but over reliance on them can be disastrous. For example, if an individual changes jobs and fails to convert group insurance coverage in time, he or she may become uninsurable and die grossly underinsured. In another case, an individual may decide to return to work after retiring. If so. he or she may lose most Social Security benefits because of regulations governing earnings.
- Failure to Apportion Funds Sensibly – Funds should be allocated first to stable investments. This means that life insurance and an emergency savings account take precedence over other investments. Only excess funds should be available for high-risk investments.
- Failure to Prepare an Estate Plan and Review It Periodically – This is an all-inclusive category and perhaps the most important: with proper planning and periodic reviews, no estate planning pitfalls exist.