Let's cut right to the chase: one of the most common estate planning mistakes is simple to avoid and usually the result of sheer forgetfulness. It has nothing to do with the will or estate taxes. It's the beneficiary designation. People forget to make changes as their life circumstances change. It's quite common for ex-spouses to inherit assets from their ex's.
The fix to one of the most common estate planning mistakes is relatively easy to address, according to "How to Avoid the Most Common Estate Planning Mistake," which appears on the financial website thestreet.com.
When you change the beneficiary on a retirement account, the update can be as easy as filling out a form. But it's the communication with your heirs that's key, especially since estate planning isn't the most enjoyable topic to discuss.
Surprises are what cause hurt feelings and even litigation. As a result, you need to figure out a way to explain the estate planning changes to your children or heirs. The starting point to any successful estate plan is a will, which is a legal document that details which heirs are to receive which assets or properties you own.
Online programs can be helpful, but user error is typically how things go wrong when drafting wills without the help of an attorney.
Another factor is taxes. A person who has a total estate of less than $5.45 million in 2016 won't pay any federal estate tax, but above that, it's a 40% flat rate (the threshold for the federal estate tax was raised a bit for 2016 from $5.43 million in 2015.).
All the same, federal estate taxes generally won't be a concern for most Americans because one would need an estate worth over $5.45 million in order for the federal estate tax to apply.
Each of us has a lifetime exemption up to that threshold. However, you should keep in mind that individual states have different thresholds. For example, some states have thresholds that are only in the six figures, which may affect more people.
Talk to a qualified estate planning attorney to draft your comprehensive estate plan. Don't be tempted to go to the Internet and try it yourself.
Reference: thestreet.com (October 31, 2015) "How to Avoid the Most Common Estate Planning Mistake"