When you have spent a lifetime accumulating assets (also known as your “estate”), you need to consider both how to protect your assets for yourself and your heirs, and how to plan for disbursement of your estate upon your death. This is what encompasses estate planning. Whether a situation is complicated or simple, they all have some things in common. Here are the 3 most common threats to your estate and your family’s future.
Threat #1: Not Having an Estate Plan
People have so many excuses why they haven’t taken the time to create even the most simplest of estate plans. Common excuses include:
- They are still too young
- They don’t think they have enough money
- They just haven’t seen the need
However, you never know when death will occur. It happens to people of all ages and financial situations. There is no estate too large or too small.
Your estate plan can consist of the basic elements of a will, powers of attorney and health care directives, OR be as complicated as a trust. It all depends upon your personal situation of health, finances and accumulated assets. Everyone has something that they’ll need to decide the outcome of: a car, a bank account or a retirement fund at the very least.
Not having an estate plan is a huge threat to your estate, assets and family’s future. Without a directive from you, your estate will go into probate, a lengthy and often expensive process by which the courts can decide the fate of your assets and care of minor children or dependents. Probate may eat up any assets you wish to pass along to your heirs and beneficiaries.
To avoid the common threats to your estate, items that can be handled in an estate plan include management of your death wishes, wealth management, payment of taxes, methods to avoid certain taxes, handling of lawsuits and credits, long-term health care directives and costs, and transition of property, a business, or other real estate holdings. It will also designate who you select as guardians for minor children and dependents.
Related: CNBC: Taxes aren’t the biggest threat to your inheritance. Family squabbles are.
Threat #2: Disorganized Finances & Wealth Management
If you should die “today” or unexpectedly, would your loved ones know where to find all of your bank accounts, account and contact information, and debts?
Without a record of these items, it can be an extremely frustrating and time-consuming task that would fall to your loved ones to handle. If your assets are disorganized or not properly titled, your estate may need the involvement of the probate court, and your heirs may not see the benefit of an inheritance from you.
Items like insurance policies, bank and retirement accounts and annuities must have written beneficiaries listed. Here are some questions to consider:
- When was the last time you updated this account information?
- Are the people still alive, and do you still want them as your beneficiaries?
- Are there new people whom you’d like to have as beneficiaries?
- Did your bank or insurance company change names?
If nobody knows the asset exists, it could be lost entirely. Disorganization of the elements in your estate plan could lead to the wrong people benefitting from your hard work.
One of the most common threats to your estate is the ability for your heirs to manage an inheritance. Are they immature about money and financially irresponsible? For many people, an inheritance is lost within just a few years of acquiring money due to their indulgences, tax or credit problems.
Related: Estate Planning Pitfalls
Threat #3: Marriage, Re-Marriage & Divorce
Marriage or remarriage can offer a serious threat to your estate if not handled properly.
When marrying, you will be combining your estate with that of your spouses.
For first-time marriages, financial documents should include surviving spouse and children directives.
For blended families or subsequent marriages, the situation becomes more complicated. For example, if each spouse has children, the assets need to be assigned to particular beneficiaries.
Without directives, if one spouse should die and the other spouse inherits everything, the children of the surviving spouse would be entitled to inherit, while the children of the deceased spouse could be cut off completely, or disinherited (though laws vary by state).
An estate plan could also create balance and protections between unequal financial situations between partners, or those with different spending/saving habits.
Divorce poses additional problems.
If you have left your inheritance to a married child and their spouse, they eventually divorce, and your estate plan is not updated to disinherit the spouse, your child may lose half of your inheritance to their ex.
If you are remarrying and bringing in assets due to divorce or widowhood from your first spouse, will your new spouse be able to acquire half of your property and savings if you divorce?
Knowledge of how to circumvent these situations will help you avoid these three most common threats to your estate.
Related: Estate Planning
Estate Planning from McCarthy & Akers
As you can see, there are many pitfalls when it comes to the 3 most common threats to your estate. That’s why it makes sense to create an estate plan now, and to regularly update it as your life circumstances change.
At McCarthy & Akers, PLC, we provide an experienced estate planning team to help you plan every aspect of your financial future, and that of your loved ones. Trust us to provide the safeguards for your future. Contact us to schedule your appointment.
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3 Most Common Threats To Your Estate and Family’s Future