3 common estate-planning mistakes of high-net-worth individuals

Estate planning for high-net-worth individuals can be extremely complicated. Such households have more intricate financial scenarios, which can make them subject to taxes and other restrictions that lower-income households do not face.

The larger an estate is, the more critical it becomes to enlist the help of a professional in the estate planning process. Otherwise, one’s inheritance could end up where they didn’t intend. Here are three common estate-planning mistakes of high-net-worth households:

Failing to regularly review and update the plan

Estate planning is not a one-time task. Preparing a will or setting up a trust once will not take into account all of the other factors that may change during the rest of one’s life. For example, a new grandchild may be born. Does the grandparent want them to receive a portion of the inheritance? What if an adult child gets divorced? Do they still want their ex-spouse included in the will? There could even be legislative changes that influence the best way to distribute assets.

Reviewing a plan with an estate planning attorney every three years – and anytime there are major family changes – can give one peace of mind that their wishes will be carried out the way they want.

Failing to consider estate tax implications

Depending on the manner in which one’s wealth is distributed to their beneficiaries, they could be liable to pay estate tax on their inheritance. This can put a considerable financial burden on loved ones, especially when significant assets are involved. However, there are ways around this.

For instance, one could start giving away their inheritance now, while they are still alive. The IRS allows people to give up $15,000 per year as a gift to an unlimited number of recipients, tax-free. Charitable organizations also avoid estate tax. Therefore, charitable giving can be an effective way to make sure all of the money reaches the intended recipients.

Failing to account for assets that are hard to divide

One may own their own business or have a vacation property out of state. If they want these assets to go to more than one person, it may create conflict in the family. It can also make it more complicated for beneficiaries to receive their inheritance.

However, certain estate planning tools can help to make the process seamless. A living trust or a joint ownership agreement can help to lay out the terms of beneficiary ownership. Such tools can also help beneficiaries to inherit without having to go through probate.

People work hard to build their wealth. Don’t let small estate planning mistakes prevent a trustee from carrying out one’s wishes when they’re gone. Working with an estate planning attorney can help ensure preparations are set up correctly.