Prevent Common Estate Planning Mistakes

Physician's Money DigestNovember15 2003
Volume 10
Issue 21

When creating an estate plan,the management of yourassets, the destination ofyour possessions, and even your family'sfinancial future are at stake. Mistakescould have a detrimental effect on yourfamily and finances. Following are themost common mistakes to avoid in estateplanning that can prove costly to youand your family:

• Leaving assets outright to yourbeneficiaries. A will commonly identifies1 or more beneficiaries who assumeownership of assets, an arrangementthat usually works. However, unless yourwishes are clearly spelled out, the assetsyou intended to be used for specific purposesmay end up being spent in lessdesirable ways. You can make sure theassets are used as you intended by implementing1 or more estate planning alternatives,such as establishing a trust.

• Assuming that joint ownershipwill prevent a problem. Joint ownershipof your assets with right of survivorshipmay solve some problems, but it can createothers. If your joint owner is a child,for example, they are under no obligationto share the assets in the accountwith siblings. In addition, with joint ownership,you may have trouble disposingof your property during your lifetime ifyour co-owner refuses to consent.

If this is a concern, you should considerestablishing a trust or simply owningsome assets individually and letting yourwill specify exactly who should receivethem upon your death. You should alsoconsider a Transfer On Death account (ifavailable in your state), which allows youto designate a beneficiary to inherit youraccount at death, but allows you to retaincomplete ownership while you are alive.

• Using only the marital deductionfor a large estate. Leaving all of yourassets outright to your spouse can eliminatefederal estate tax, regardless of thesize of your estate. But using the maritaldeduction unwisely may create an unnecessaryestate tax burden when thesurviving spouse dies. A simple trust canavoid this result. Work with your attorneyto create a plan that can save yourfamily a substantial amount of money.

Smartbusiness sense:

• Neglecting your business. Planningto transfer a business takes specializedskills. The first step is to identify familymembers who are both capable andinterested in taking over the enterprise.Transferring management and ownershipof your business will depend on many factors,including your income needs, yoursuccessors' financial situations, and yourintentions with regard to children whomay not be involved in the business. Consult with your estateplanning professional before you act onany business transfer or estate plan.

• Failing to review your will andestate plans periodically. Regular reviewsof your estate plan can ensure that it continuesto accomplish what you intend foryour assets and beneficiaries. Births,deaths, marriages, and changing tax lawsare good reasons to amend your plan;any of these events could change your situationand your plans for your family. Bynot periodically reviewing your plans, youexpose loved ones to unnecessary tax consequences,family discontent, and evenunintended disinheritances.

Joseph F. Lagowski is vice president,investments, and a financialconsultant with AG Edwards inHillsborough, NJ. He welcomesquestions or comments at 800-288-0901 or This article was providedby AG Edwards & Sons, Inc, member SIPC.

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