Actually establishing an estate plan is an important first step. Proactive strategies can provide peace of mind for you and your loved ones. However, you want to make sure you do things right. The smallest of mistakes can create the largest amount of chaos during difficult times.
All too common oversights include:
An IRA can be the most valuable asset in a trust. However, the lack of a “see-through” provision could result in thousands of dollars in taxes when that money goes to beneficiaries. When a “see-through trust” serves as the named beneficiary, the IRS will treat the trust’s beneficiaries as an IRA’s direct beneficiaries. Simply stated, beneficiaries are taxed individually, accounting for significant savings depending on their individual tax situations.
POD vs. TOD
POD is an acronym for “payable on death” while TOD stands for “transfer on death.” They both provide instructions on checking, money market, savings and CD accounts. The designations allow beneficiaries to receive assets without enduring the expensive probate process. Having a POD or TOD can provide vital cost savings.
Keep It Simple
While having multiple bank accounts in life is normal, it can also create complications in probating your estate. Consolidating accounts can help ease the process and still stay within the FDIC limit of $250,000 per depositor, per bank account.
Where Is Everything?
Even the most detail-oriented people can have all the right paperwork in place. Yet, that information loses all value if they are missing. A checklist can go a long way for loved ones to find important documents ranging from your birth certificate and Social Security card to burial instructions and the cemetery plot deed.
While the most egregious error would be not having an estate plan in the first place, you need to avoid the most simple of gaffes when leaving behind your legacy.