If the time is right for you to create your estate plan, there are certain elements to consider.
Here are four common mistakes you can avoid and retain estate planning control.
1. Forgetting about long-term care
The cost for home health care aides averages $50,000 per year. A private room in a nursing facility runs more than $100,000 per year. You must remember that 70% of people over the age of 65 will need long-term care. In view of this, you should investigate long-term health insurance early on since the cost increases every year.
2. Not planning for minors
You need to ensure proper care for minor children in the event of your unexpected death. You can designate a guardian in your will—but first, ask the person you name if they will agree to take on this responsibility.
3. Avoiding the impact of taxes
In California, the Franchise Tax Board does not levy estate taxes as such on an inheritance. However, your beneficiaries will have to pay income tax on certain assets. Inherited accounts such as a 401(k) are subject to required minimum distributions or RMDs, which are taxed as ordinary income. You can avoid this on behalf of your heirs with a Roth IRA conversion during your lifetime. Your attorney or accountant can help you understand how this works.
4. Failing to update your plan
Life is full of major happenings, and some are significant enough to affect your estate plan. For example, if you have a new grandchild, if you divorce or if a beneficiary dies, you should make the appropriate changes. A good rule of thumb is to consider an update every three to five years. Avoid mistakes, keep the information current and you will remain in control of your estate planning responsibilities.