The transfer of wealth comes with its fair share of difficulties and opportunities if done well. The changing legal environment and tax changes make planning stressful but these tips can help save your beneficiaries thousands down the road. Take a look at the things to avoid when planning your estate.
1. Not properly designating beneficiaries
One of the great advantages to adding a beneficiary to your account is that by doing so, your account bypasses the timely and costly process of probate and passes directly to your beneficiaries.
2. Putting down a minor as a beneficiary
Naming minors such as young children or grandchildren as beneficiaries on your accounts may result in unintended consequences if they are still minors when you die. Most minors don’t have the legal authority to take control of inheritance or investment accounts until they reach the age of 18 or 21, depending on the laws of your state.
3. Failing to fund a trust
The act of placing your assets into the trust is called “funding.” Funding may include changing the ownership of your bank and investment accounts from being individually owned to being owned in the name of the trust. It may also include designating your trust as the beneficiary on life insurance, retirement accounts and annuities.
4. Creating a tax nightmare for your heirs
One of the great advantages of passing on real estate or other highly appreciated investments or property is that your beneficiaries get what is called a “step-up” in basis. This means they are not responsible for any income taxes on the appreciated assets when they are received.
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