Do Not Overlook These Essential Estate Planning Considerations

Too often, individuals leave loved ones high and dry after they pass on by failing to thoroughly develop and update their estate plans. Overlooking some fundamental estate planning considerations can prevent loved ones from inheriting the assets intended for them. Fortunately, updating end-of-life documents is easy with the help of an experienced New Jersey estate planning lawyer.

Naming and Updating Account Beneficiaries

One of the most crucial steps individuals can take while planning their estates is to name beneficiaries on their financial accounts and periodically update them. The beneficiary designation on an account overrides whoever is slated to inherit the account in an individual's will. Financial accounts that commonly require a designated beneficiary include retirement accounts, brokerage accounts, life insurance policies and bank accounts.

Since the majority of an individual's wealth is in assets that require a designated beneficiary, it is vitally important to keep that beneficiary current. Individuals may wish to change the beneficiaries on their accounts after a major life event like marriage, divorce, having children, or becoming disabled. On the other hand, it may be wise to change a beneficiary designation if the beneficiary experiences a life change, like a change in marital status.

Making Gifts While Alive Helps Reduce Future Estate Tax Burdens

Another consideration many people overlook when planning their estates is the difference in taxes between a monetary gift given while an individual is alive versus money inherited after an individual's death.

In 2012, individuals can give monetary gifts to loved ones up to $13,000 each, tax-free. Giving while still alive reduces the value of an individual's estate, resulting in lower tax rates once he or she passes on. Individuals who transfer ownership of a life insurance policy while still alive also exclude that asset from estate taxes. For these reasons, many estate planning lawyers recommend clients give gifts while they are still alive. For some, this may mean developing a plan that gives the maximum gift every year for several years.

Hiring a Lawyer to Help with the Planning Process

Lastly, individuals should not overlook the value of hiring a professional estate planning attorney. Many online, do-it-yourself programs exist to create end-of-life documents like wills, trusts and powers of attorneys. However, these programs and services often overlook nuances and changes in the law that may make these homemade documents inaccurate, creating a disaster for loved ones. Hiring an experienced lawyer can help save individuals money and their loved ones stress.