Beware of Pitfalls When Creating Your Estate Plan

Common mistakes in estate planning can create problems for you and your family.


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When creating an estate plan, the management of your assets, the destination of your possessions-and even your family's financial future-are at stake. Any mistakes in this process could have a detrimental effect on your family and finances. If you are careful, a properly prepared estate plan can allow you to distribute your assets however you choose and reduce the effect of estate taxes. Here are some of the most common mistakes in estate planning that may prove to be costly to you and your family:

  • Leaving your assets outright to your beneficiaries. A will commonly identifies one or more beneficiaries who assume ownership of assets-an arrangement that usually works. However, unless your wishes are clearly spelled out, assets you want used for specific purposes may end up being spent in less desirable ways. You can make sure the assets are used as you intended by implementing one or more estate planning alternatives. For example, establishing a trust ensures that those earmarked assets are used to pay for a grandchild's education expenses or other purposes you specify.


  • Assuming that joint ownership will prevent any problems. Joint ownership of your assets with right of survivorship may solve some problems, but it can create others at the same time. Joint ownership with a child may keep your assets out of probate and allow that child to help you with your finances; however, it can confuse and complicate your transfer plans.

    If your joint owner is a child, for example, they are under no obligation to share the assets in the account with siblings. In addition, with joint ownership, you may have trouble disposing of your property during your lifetime if your co-owner refuses to consent. If this is a concern, you should consider a trust or simply individually own some assets and let your will specify exactly who should receive them. Consider also a Transfer On Death account-if available for those assets in your state-which allows you to designate a beneficiary to inherit your account at death, but allows you to retain complete ownership while you are alive.


  • Using only the marital deduction for a large estate. Leaving all of your assets outright to your spouse can eliminate federal estate tax upon your death (should you die first), regardless of the size of your estate. But using the marital deduction unwisely may create an unnecessary estate tax burden when the surviving spouse dies. A simple trust can avoid this result. Work with your attorney to create a plan that may save your family a substantial amount of money.


  • Neglecting your business. Planning to transfer a business interest takes specialized skills. The first step is to identify those family members who are both capable and interested in taking over the enterprise. Once you have identified your successors, transferring management and ownership of your business will depend on many factors including your income needs, your successors' own financial situation and your intentions with regard to children who may not be involved in the business. You should consult your estate planning professional before you act on any business transfer or estate plan.


  • Failing to review your will and estate plans periodically. Regular reviews of your estate plan can ensure that it continues to accomplish what you intend for your beneficiaries. Births, deaths, marriages and changing tax laws are good reasons to amend your plan; any of these could change your situation and your plans for your family.

Without proper planning and reviews, you expose your loved ones to unnecessary tax consequences, family discontent and even unintended disinheritances.

*A.G. Edwards does not render tax or legal advice. Should such services be necessary, consult a qualified professional.

For more information contact Daryl Kersting, financial consultant for A.G. Edwards & Sons, Inc. (St. Louis, MO), Member SIPC, at (800) 926-9223 or via email at daryl.kersting@agedwards.com.

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