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Monday, December 21, 2020

Common Estate Planning Errors

Many people are unaware of the complexity of the estate planning process. Even if you do not have substantial assets, it is probable that, without the assistance of an experienced estate planning attorney, you may make one or more serious mistakes as you plan for your future and the future of those you love. Though it may seem simple to choose the attorney whose shingle you pass on the way to work, or even to download estate planning forms from the internet, don’t kid yourself. As in most areas of life, finding an accomplished legal professional will be well worth it in the long run.

Located in Staten Island or New Jersey, Merlino & Gonzalez has earned its outstanding reputation through hard work and a history of providing its clients with customized service. We are well-known for our attention to detail, an attribute that will help keep you from making a costly mistake. If you have an existing estate plan that seems inadequate or requires updating, we have the skills you need. Our goal is to protect you and your family by creating an estate plan that is comprehensive, legally binding, and does not have any of the following flaws:

1. Not Taking Eventualities into Account

Whether you are young and naive, middle-aged and unwilling to consider your mortality, or elderly and forgetful, it is essential to plan for the improbable as well as the expected. Our estate planning attorneys will make sure that you prepare for both desirable and frightening unanticipated events, such as:

  • Unanticipated child or grandchild
  • Early incapacity or death of yourself or a member of your family
  • Offspring with special needs or remarkable talents
  • Windfall (e.g. inheritance, successful lawsuit, or lottery win)
  • Loss of major assets (e.g.investment loss or overwhelming medical expenses)

Unexpected as such occurrences may be, they are among the primary reasons for creating an estate plan in the first place. A strong estate plan may include

  • Will to designate beneficiaries and a guardian for young children
  • Trusts to protect assets from excessive taxation, spendthrift heirs, or loss of government benefits for yourself or close relatives
  • Health care proxy and living will to cover the eventuality that you may require end-of-life care prematurely

It’s worthwhile to remember that the vast majority of people do not believe they will die young and yet a significant percentage of people do die under the age of 50.

2. Assuming You Know How Loved Ones Will Behave in the Future

Very few of our clients believe that their beneficiaries will argue over the terms of their wills or that anyone will contest them. Nonetheless, such events do happen. Most of us assume that we know whether our heirs will decide to adopt a child, quit a job, start a business, divorce, or remarry, but such assumptions have a way of being wrong. It takes an objective estate planning attorney to help you consider possibilities and clarify options.

3. Neglecting to Name Contingent Beneficiaries

Not naming a beneficiary to replace one who passes away before your death can be a serious problem. It may result in an alternative beneficiary being named by the estate, subjecting your estate to probate, with all of its costs and delays, and making some of your assets vulnerable to creditors. Furthermore, not having a contingent beneficiary on an IRA can result in the loss of a valuable tax break.

4. “Selling” Property for a Dollar

Falling for the antiquated technique in which you “sell” a valuable piece of property for a low sum to an heir, thus removing that property (whether it is an expensive car, a boat, or acreage for a vacation home) from your estate. The theory was that you would not pay taxes on the gain.

A sharp estate planning lawyer will explain that the IRS when it recognizes that you “sold” your asset for far less than its market value, will deem the property a gift and tax it accordingly. In this situation, you will not be avoiding taxation at all. If the property you have given to your beneficiary accrues in value between the time you “sell” it and the time your loved one sells it, she or he will have to pay on the total amount gained.

5. Putting Restrictions on Your Heirs Without Thinking Them Through

You may think you’re shaping the future in the best possible way by leaving money in trust for a beneficiary by insisting that the individual finish college, marry, join the armed forces, or live in the family home to gain his or her full inheritance. Unfortunately, you may be disinheriting someone you love and want to provide for.

Life has a way of taking different directions than we intend. Our “best-laid plans” often fly in the face of what is worthwhile, sensible, or even possible. A wise estate planning attorney will help you gain perspective on how much control you should try to take of someone else’s life. It is impossible to judge what circumstances will be in the years after your death. Presumably, the last thing you want is to cause bitterness or disharmony among family members.

6. Failing to Update Your Estate Plan regularly

Very often, our clients are delighted when they believe we have “finished” the complicated task of estate planning. Nonetheless, life is full of changes and estate plans must be altered to reflect significant occurrences in your life. Unless you review your estate plan with a talented estate planning attorney regularly, you risk disinheriting someone you love, leaving the bulk of your estate to an ex-spouse, leaving a large sum of money to an heir who has developed a drug habit, or not taking advantage of a change in the tax code.


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