5 Estate Planning Mistakes That Could Leave Your Heirs in a Tax Trap
Estate planning is essential for ensuring your wealth passes smoothly to the next generation. However, even the most carefully laid plans can have gaps that lead to unintended tax consequences. Below are five common estate planning mistakes that could leave your heirs facing an unexpected tax burden.
1) Not Updating Beneficiary Designations
One of the most common mistakes is failing to update beneficiary designations on retirement accounts, life insurance policies, and other financial instruments. Even if your will is up to date, the designations on these accounts will take precedence. This could result in assets passing to the wrong people or leaving heirs with significant tax burdens.
2) Overlooking State Estate Taxes
While federal estate taxes tend to grab the headlines, state estate taxes are often overlooked. Many states have lower exemption thresholds than the federal government, meaning your estate could be hit with taxes that you weren’t expecting. Reviewing both federal and state tax laws regularly can help you avoid this trap.
3) Not Considering Future Appreciation
If your estate includes assets like real estate, art, or stocks, it’s important to consider how those assets will appreciate over time. Failing to account for future growth could push your estate over tax exemption thresholds, leaving heirs with a larger tax bill than anticipated. Regularly reassessing the value of your estate can prevent this.
4) Using Joint Ownership as a Simple Solution
Many people add their children or spouses as joint owners of property or accounts as an easy way to transfer assets. However, joint ownership can trigger gift taxes or cause unintended capital gains taxes for the surviving owner. It’s important to consider whether joint ownership is truly the best strategy for your situation.
5) Ignoring Trust Revisions
Many estate plans include a trust, but these trusts require regular updates to stay effective. Tax laws change, as do your family’s circumstances. Ignoring the need to revise your trust could result in outdated provisions that leave your heirs vulnerable to unnecessary taxes. Periodic reviews are essential to ensure your trust continues to serve its intended purpose.
At Ballast Advisors, we understand that a sound estate plan goes beyond just drafting documents—it requires ongoing attention and regular updates. Our team is here to help you identify potential pitfalls and ensure your wealth is transferred efficiently and in line with your wishes. Contact us today for a comprehensive review of your estate plan.
IMPORTANT DISCLOSURES
The opinions expressed herein are those of Ballast Advisors, LLC and are subject to change without notice. The third-party material presented is derived from sources Ballast Advisors consider to be reliable, but the accuracy and completeness cannot be guaranteed. Past performance is not indicative of future results. Nothing contained herein is an offer to purchase or sell any product. This material is for informational purposes only and should not be considered investment advice. Ballast Advisors reserve the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual's personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. Ballast Advisors, LLC is a registered investment advisor under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm, including its services, strategies, and fees can be found in our ADV Part 2, which is available without charge upon request. BAL-24-31
