Putting together an estate plan takes work, careful thought and an understanding of the law. Unfortunately, many Illinois residents either put off the estate planning process, or they complete it but end up with plans that have glaring errors that will only hurt their loved ones in the end. If you are getting ready to go through the estate planning process or you already have but feel your plan needs updating, make sure to do it right and that it fits your needs.
There are a few areas where people tend to get it wrong when creating their estate plans. These areas include:
- Tax issues
- Trust problems
Mistakes in any of these areas can make your estate plan worthless.
Two main issues come up regarding beneficiaries. First, is some people opt to name their minor children as their heirs. If you’re wondering what is wrong with that, the answer is nothing, really. Obviously, you want to provide for your kids should anything happen to you, but minors lack the authority to control an inheritance. The fix here is to name a guardian who can manage it until your children are legally able to on their own.
The second is some people fail to name beneficiaries on financial accounts or fail to update beneficiaries when needed. One way to avoid having a life insurance policy, retirement account or other financial accounts from being subject to probate is by designating beneficiaries directly to these assets. This way, the funds will go straight to the beneficiary. If you fail to update beneficiaries as needed, these assets may end up going to an unintended person.
No one wants their beneficiaries to end up having significant tax bills because of the assets left to them. The good news is, there are estate planning options that offer tax benefits. If you can apply them to your plan, your heirs — not Uncle Sam — will receive what you intended for them.
Not everyone needs a trust. Legal counsel can help you decide if it would benefit your situation. If you create a trust, be sure to fund it. It’s surprising how many people fail to do so. Without funding the trust, the court may rule it invalid.
Get estate planning done, but make sure it is mistake-free
Too few Illinois residents have estate plans in place, as many believe that estate planning is something that can wait. The truth is, the sooner you do it, the better. When you do, just make sure it is done right and is free from error so that your wishes can be honored and your heirs are not left cleaning up a mess.