New Yorkers, and other people throughout the country, may have thought about creating a will or trust, but very few follow through. Because it involves coming to terms with mortality, estate planning can be a difficult topic to broach. However, many people procrastinate, which makes the situation worse. Here are some common mistakes that should be avoided.
When estate planning, it is important to not focus solely on taxes. There are many ways to reduce tax liability, so a person should not give a huge gift in order to decreases taxes and not have enough money for retirement. Although it is unfortunate to think about it, a trust should plan for a potential divorce. A man could set up a trust fund for his child and the ex-wife could use it for child support.
Another common mistake is not being specific. If there are any vague statements in the trust or will, they can be misinterpreted and heirs can find loopholes to ensure they get more money. Also, people should consider more than just children and spouses when creating a will. Pets are also family members that need to be included in the legal documents. If an appropriate person is not chosen to care for a pet after the owner's death, then the animal may be put to sleep, which is unfortunate.
It is also important to remember that the creation of wills, trusts or other estate planning document is not a one-time deal. It should be updated after various life events, such as marriage, divorce or the birth of children or grandchildren. In addition, some people listed as heirs in the trust may be deceased, so it is important to review these documents on a regular basis.
Source: OnWallStreet, "10 Biggest Estate Planning Mistakes," Elizabeth Wine, Nov. 1, 2012