Industry News - Regulatory Updates
March 9, 2012
Common errors during estate planning
Because of the complexities involved, dealing with the combined financial and personal aspects of creating an estate plan sometimes leads to mistakes.
Some errors are particularly common, professionals recently told LifeHealthPro. One decision that can lead to difficulties is naming minor children as primary or contingent beneficiaries of life insurance and retirement plans, expert Helen Modly told the news source. When they inherit directly, the court will end up appointing a guardian to oversee the assets and file annual documentation with the local court. Instead, a living trust might be used to delay inheritance until children are older, avoiding this situation.
Another choice experts warned about is focusing too much on estate tax planning, to the detriment of other considerations. Those seeking to pass on their assets are often concerned with their heirs' ability to manage finances, selection of proper trustees and other aspects.
Designating beneficiaries is another point of importance. Certified financial planner Kevin Reardon noted LifeHealthPro that estate planning should be updated after events such as a divorce or death, to ensure that beneficiaries are selected properly.
The same concern applies to trustees and other involved parties. He also indicated that care should be taken when drawing up a plan to support a special needs child or grandchild. If they are direct beneficiaries, their eligibility for Social Security disability benefits may be impacted. Instead, a trust for benefit of the individual can be created.
When setting up trusts, those involved may also forget to include certain assets. This can reduce the advantages of the trust, forcing beneficiaries to go through probate court and pay associated expenses.