Pitfall #1 --        Not Preparing an Estate Plan

Intestate refers to a person who dies without a will. If this happens, a judge appoints someone to distribute all of the assets according to state laws. These assets may be passed on to relatives; however, there is a chance that the state may claim the assets.

In cases where specific beneficiaries are listed, assets should pass directly to the beneficiary. These include:

• Individual Retirement Accounts (IRAs)
• Life Insurance policies
• 401(k)s
• Certificates of Deposit (CDs)
• Joint accounts
• Payable on Death accounts (PODs).

Pitfall #2 --        Creating an Estate Plan without an Estate Planning     Professional

Estate-planning professionals can help you improve your estate plans to ensure all aspects are covered. They can ensure that all necessary paperwork is prepared and executed correctly. In some cases, they may even discuss options of how to avoid paying large amounts of estate or probate taxes.

Estate planning professionals consist of:

• Estate planning attorneys
• Tax advisors
• Financial planners

To find a local estate-planning professional, visit http://www.estateplanning.com/con/index.html.

Pitfall #3 --        Not Sharing the Estate Plan with Family and Friends

Although death is a difficult subject, it is important to discuss your estate plan with friends and family before your die. Make sure your beneficiaries understand why they will receive certain property (or will not receive certain property).

You also want to make sure that your trustee or executor understands all of the requirements of this title, and ensure that he or she (if a family member or friend) is willing to undertake this job.

Pitfall #4 --        Choosing an Unreliable Trustee or Executor

An executor is a person (or persons in the case of co-executors) who helps your estate get through probate by:

• Collecting estate assets
• Paying taxes
• Taking an estate inventory
• Administering property to beneficiaries
• Performing other duties

A trustee is a person (or persons in the case of co-trustees) or institution that handles all aspects of the trust fund, including:

• Transferring the assets to the trust
• Administering the assets in the trust
• Keeping records of investments, income, etc.
• Providing assets to beneficiaries
• Paying taxes and filing tax returns
• Performing other duties.

These duties are long-term and require considerable knowledge regarding estates, so choose someone who can continually monitor the trust. A bank or institution is usually a good choice for a trustee.

Pitfall #5 --        Not Having a Health Care Plan

In order to protect family members from making difficult decisions, consider preparing an advance directive that specifies what is to be done in certain medical situations. For forms and information about storing your advance directive, visit the U.S. Living Will Registry at http://www.uslivingwillregistry.com/forms.shtm.

Pitfall #6 --        Thinking a Will and a Living Trust are the Same

Wills:

• Go through probate court
• Require executors
• Have a probate tax of 3 - 10% of the gross estate value
• Become operative upon a person’s death
• Are usually inexpensive to create

Living Trusts:

- Are not subject to probate taxes, court costs, etc.

- Automatically transfer estate to listed beneficiaries

- Are distributed to beneficiaries by trustees

- May come into play if a person becomes incompetent

- May be costly to create

Pitfall #7 --        Not Having Life Insurance

You may not think of life insurance as part of estate planning, but it is something you need to consider. The type of life insurance you choose (term or whole life) determines what your beneficiaries receive.

Pitfall #8 --        Allowing Listed Beneficiaries to Overrule a Will

Although it is important to list beneficiaries in your will, there are some instances when these beneficiaries may not receive the assets. These apply when beneficiaries listed on the documents and/or accounts do not match those listed in a will. Some of these include:

• IRAs
• 401(k)s
• CDs
• Joint accounts

To avoid this problem, ensure that wills list the same beneficiaries as accounts and/or documents.

Pitfall #9 --        Not Updating an Estate Plan

It is a good idea to review your estate plan periodically. Changes in your life statuses, or in the lives of your dependents, may require you to alter this plan.

Pitfall #10 --Paying Unnecessary Estate Taxes

There may be taxes associated with your estate. Some of them include:

• Estate tax - the federal government excludes estates from this tax if the total estate is lower than a certain amount of money (visit the IRS Web site at http://www.irs.gov/businesses/small/article/0,,id=164871,00.html for updated estate amounts)

• Probate tax - percentage amount is determined by state (usually between 3 - 10%); this tax is not imposed on estates under a certain amount
• Gift tax - imposed on gifts over a certain amount per year or lifetime
• State tax - some states, such as New Jersey, impose separate state taxes on estates (New Jersey Inheritance tax)

For a complete list of taxes, and possible ways to avoid or lessen them, contact an estate-planning professional.

Additional Resources

• FindLaw Web site:                                            

      http://estate.findlaw.com/estate-planning

• Washington Mutual Web site: https://www.wamu.com/investments/investment_accounts/life_plan/browse_topics/article5.asp

• Federal Citizen Information Center Web site: http://www.pueblo.gsa.gov/cic_text/money/estateplan/planning.htm