We typically share a lot of good information on this blog about what you should do when you are planning your estate. On this day, we are going to flip the script and go in the other direction. In this post, we will highlight some estate planning mistakes that can yield negative consequences. When you are aware of the potential fallout, it is likely that you will steer clear of these traps.
Failure to Consider Estate Taxes
There are people that assume that they don’t have to worry about estate taxes, and the fact is, most Americans are not exposed. The federal estate tax is only applicable are asset transfers that exceed $11.4 million in 2019. There are ongoing adjustments to account for inflation, so you may see a slightly higher figure next year. To give you an idea of what to expect, the exclusion was $11.18 million in 2018.
It is important to understand the fact that real property that you may own is counted. People that own large tracts of farmland may not consider themselves to be really wealthy, but the property can be very valuable. This is something to take into consideration when you are evaluating potential estate tax liability.
There are a number of states in the union that impose state level estates taxes, and the exclusions are typically much lower than the federal exclusion. As a result, you could be exposed on the state-level even you are federally exempt in these states.
Ohio used to be in this group, and we had the lowest exclusion in the country at just $338,333. The good news is that it was repealed for deaths taking place January 1, 2013 and later. However, if you own property in a state with an estate tax, it could be a factor for you.
Clearly, if the value of your estate is anywhere near taxable territory, you should discuss tax efficiency strategies with one of our Cincinnati estate planning attorneys.
Ignoring Potential Nursing Home Costs
Far too many people ignore the potential impact of nursing home costs, and there are a couple of different reasons for it. One of them is the idea that it is unlikely that you will ever need nursing home care. In fact, 70% of elders will require some type of living assistance, and many of them will spend their last days in nursing homes.
Another misconception is the notion that Medicare will pay for a stay in a nursing home. The program will pay for convalescent care after an injury or illness, but it does not pay for the convalescent care that you would receive in a nursing home.
In our part of the country, it could cost somewhere in the vicinity of $120,000 to spend a year in a private room in a nursing home. If you are married, your family may face two different rounds of long-term care expenses, so this is something that you should address when you are devising a plan for aging.
Lack of an Incapacity Planning Component
Some people will slap together a last will of some kind and call it a day. This is often done with the assistance of a boilerplate, do-it-yourself, fill-in-the-blanks download or worksheet. This in itself is a very big mistake, and we will look at it in another blog post. The error that we will focus on here is the failure to address possible latter life incapacity.
Once you become old enough to receive your full Social Security benefit, your life expectancy will be at least 85 years. Clearly, many people that are in this age group become unable to make sound decisions on their own. If you do nothing to prepare for this eventuality, the state could ultimately appoint a guardian to act on your behalf.
To avoid this fate and choose your own representatives, you can execute a durable power of attorney to name someone to manage your financial affairs. Your incapacity plan could also include a health care proxy that is used to empower someone to make medical decisions for you.
Schedule a Consultation!
The best way to avoid these mistakes is to discuss your options with one of our Cincinnati estate planning attorneys. If you would like to do just that, you can send us a message to request a consultation appointment or call us at 513-721-1513.
- What You Need to Know about Planning for Elder Care - March 21, 2023
- Can a Trust Be Contested? - March 16, 2023
- Ohio Medicaid Limits for 2023 - March 14, 2023