When you're making your estate plan, you may be tempted to "go it on your own" -- perhaps with a do-it-yourself template that allows you to create a last will and testament.
Doing this, however, could make your estate plan vulnerable to being challenged, and -- in the end -- your wishes might not be carried out as you hoped.
Common mistakes made by do-it-yourself estate planners
Experience brings wisdom and knowledge, and when it comes to planning an estate, wisdom and knowledge is everything. Most Ohio residents have never created a will, a trust or tried to organize an estate plan before. Lacking experience and professional legal training, do-it-yourself planners may commit the following errors:
- Beneficiary designation errors: Many estate planners do not know that beneficiary designations on their IRAs, 401(k)s, insurance policies and other financial accounts supersede their wills. As such, if you say in your will that all of your assets should go to a distant cousin, but the beneficiary designation on your IRA says that the account should go to your ex-spouse, then your ex-spouse will get the IRA. A lot of mistakes happen because divorced spouses forget to update their beneficiary designations, or when they don't realize that these designations supersede what's in the will.
- Estate tax mistakes regarding life insurance: Let's say you have $4 million worth of assets. That's well under the federal estate tax exemption of $5.49 million for those who die in 2017, so your estate won't trigger these taxes, right? If you have a $2 million life insurance policy, think again. This extra life insurance money will be added to your total estate value and could potentially trigger federal estate tax liabilities.
- Failure to take advantage of trust planning: Trusts can offer many benefits to your family. For example, if you're worried that your adult children aren't mature enough to manage a large amount of wealth, you can set up a spendthrift trust that doles out wealth to your children slowly over time. Also, a trust offers privacy, so that your heirs can inherit assets without the entire world knowing what you gave them. In addition, a trust gives its beneficiaries the ability to skip long, drawn out probate proceedings. Failing to take advantage of these and other trust benefits represents big mistake that do-it-yourself estate planners -- who are not "in the know" -- often make.
Know your options, avoid mistakes and prepare for the future
There are so many options and solutions available to Ohio estate planners that it's understandable how a novice, do-it-yourselfer could get into trouble or miss out on available benefits. If you take the time to educate yourself on the estate planning options that are available to you and your family, the efforts you make can benefit your heirs greatly.