Every adult in New Jersey likely knows the basics of estate planning. It’s important to have a will and name an executor in it, but that’s only the beginning. An estate plan isn’t just about the end of a life: It’s also about incapacitation and about an individual’s legacy. There are a few common pitfalls that everyone should be aware of before getting started.
One very common issue that people forget to attend to with estate planning is their beneficiaries. Many people have life insurance policies through their employers. It can be easy to forget those beneficiary designations during open enrollment, but it’s very important to update them. Insurance policies are binding legal contracts, and they can actually supersede whatever is written in a will.
Another issue to consider in designating beneficiaries is age. Minors can’t manage their own funds. When naming a minor child or grandchild, it’s also important to consider who that person’s guardian will be. The guardian will be responsible for managing the inheritance until the child comes of age.
Taxes and inheritances
It’s also a good idea to try to insulate heirs from taxes, but tax policy can change all the time. Currently, the federal tax system is favorable to passing on wealth. That may not always be true. Retirement account distributions are also subject to taxation in some circumstances.
One way to handle these thorny tax issues is to consult with professionals. It’s prudent to consult an attorney and an accounting professional when crafting an estate plan. It’s also important to remember to revisit estate plans every few years.