You’ve probably heard this before, but yet, everyone should have an estate plan ready. After all, we never know when we or a loved one will pass. However, this is much easier said than done. While it’s no secret that this is a tough procedure, the mistakes could also be costly when the process is not done right. Without further ado, here are some frequent estate planning disasters and how to avoid them!
#1: Failing to Update Your Estate Plan
Your estate plan should evolve in tandem with your life’s events. Your estate plan is first built on assumptions about money, asset growth, and family composition. These are the plans for today in order to be ready for the circumstances tomorrow. Many individuals believe that after they have created an estate plan, everything else will “fall into place.”
An out-of-date estate plan will only add to the uncertainty and instability that will follow your death. Many people underestimate the importance of life-changing events. Experts advise revisiting your estate plan every three to five years, or whenever one of the following events occurs:
- Personal development (mental or physical health)
- Alterations in your financial circumstances (receiving a big inheritance, bankruptcy, acquisition of new property)
- The death or birth of a child; divorce; the death of a family member;
- Changes in tax or estate planning legislation.
#2: Ignoring the Debtor’s Power
Executors must settle the deceased’s obligations before dispersing assets from the estate account. In this situation, the most frequent sort of debt is a mortgage, which often consumes a large portion of the inheritance. This has an impact on the amount of money allocated to estate beneficiaries.
Uncertainty about how some debts must be paid or acquired may cause issues for your beneficiaries. As a result, understanding your debt and how it will be paid after your death is critical, even if you believe you have divided assets fairly based on their face worth.
#3: Tax Illiteracy
Tax issues, including debts, may have an impact on the amount of money your beneficiaries receive from your inheritance. Assume that not all of your assets will be handed tax-free to recipients.
True, the majority of assets acquired at death can be passed on tax-free to beneficiaries. There are a few exceptions. When certain assets are sold, capital gains tax, for example, must be paid. This demands a comprehensive grasp of income, capital gains, and property taxes. While the beneficiary must account for this when selling the item, alerting them now will be incredibly beneficial.
#4: Incorrect Executor Selection
Nominating the wrong executor could pose serious repercussions. An executor is tasked with taking over control of your estate after your death, distributing assets to beneficiaries, and is responsible for funeral expenses and other administrative costs. As a result, avoid appointing inexperienced, disorganized, dishonest, or biased estate executors.
Executors are typically a spouse, close relative, friend, or trusted advisor. Remember that naming an executor is not a favor or a luxury, but rather a substantial obligation that can be time-consuming and distressing. When choosing an executor, you have to ensure that they can carry out their tasks while grieving, and that they are prepared to deal with the difficulties of the process. This way, your estate is handled according to your preferences.
#5: Failure to Finalize Superannuation Plans
Many Australians are unaware that their superannuation can be handed on to loved ones with careful planning. The fund provider, the fund, the applicable laws, and the trustee determine your superannuation distribution. Additionally, you can ensure that your desires regarding your super fund are carried out by filing a formal death benefit nomination.
If you administer your own superannuation fund, understand the dangers of not carrying this out as part of your wishes. Remember that superannuation should be considered in your plans. Financial, estate, and superannuation planning should all be done together, not separately.
Conclusion
Nobody wants to begin their estate planning simply because it promotes the idea of death and grieving. However, it’s simply the responsible thing to do. Now that you’re aware of these estate planning disasters and how to avoid them, finalizing your plans won’t be as difficult anymore!
If you’re interested in estate planning, New Wave Financial Planning is a recognized, forward-thinking, and innovative financial planning organization. We serve clients both locally and nationally from our Gold Coast headquarters. Superior service, incredible prices, and even better results are our trademarks. Each client benefits from our excitement, competence, and dedication to our field. Contact us today!
