The right estate planning strategies establish lasting financial protection for you and your family. But there are common mistakes that can arise if you aren’t familiar with the basic principles of asset planning.
When assets are incorrectly designated to the wrong people, it increases the risk of legal complications and can cost family members time and money to correct these mistakes.
Knowing how to avoid or address the improper disposition of assets is a major step in protecting your assets, their distribution, and your family’s future.
Wrong Assets, Wrong Distribution
Improper dispositions are the incorrect distribution of assets. These assets may be distributed to the wrong beneficiaries in the wrong manner, leading to a number of complications for the estate and beneficiaries.
For example, if a large estate is left to a single remaining family member, it may place an overwhelming burden on the recipient if he or she is unable to handle the complexities related to its assets.
In other cases, distributions are given to someone suffering from mental, emotional, or other health challenges. This puts the estate’s assets at risk while limiting the ability of family members to address issues that result from their improper disposition.
Many people establish an equal distribution of assets among family members. But the needs and abilities of each recipient may vary.
This impacts the benefits and limitations that estate assets create for beneficiaries. So equal distributions may not always be the best way to distribute assets.
You can address this issue through the use of trust provisions that give trustees the ability to provide a greater allocation to those who should receive a higher portion of the estate’s assets.
The Right Distributions for the Right Beneficiaries
The improper disposition of assets overlooks the needs of beneficiaries. Children, adults with special needs, and those in low-income tax brackets must be considered when distributing assets.
Recipients in higher-income tax brackets may not need to receive a significant portion of an estate’s assets. Some family members may be better served by receiving more principal from the estate.
Trustees make important decisions that ensure that assets are given to the right people in the right manner. Restrictions, timelines, and other elements should be used in your estate plan so that specific needs and limitations are considered.
Including provisions related to asset investment prevents beneficiaries from liquidating and spending their distributions in ways that put them at the risk of financial losses.
Your estate planning attorney will help you determine the right strategies to distribute assets and support the financial wellbeing of your entire family.
Common Mistakes to Avoid in Estate Planning
Along with the improper disposition of assets, there are other mistakes that you should avoid in order to get the most out of your estate planning.
The right executor is critical to all aspects of your estate plan. Choosing the wrong person to serve as your executor can impact how your assets are distributed.
Executors must be knowledgeable and serve without any conflicts of interest. They must have a full understanding of your goals and personal preferences in planning for the future of your estate.
Errors related to wills and other estate planning vehicles are also common sources of estate planning issues.
Wills need to be updated over time to reflect changes in the needs of family members. Failing to keep your will updated may result in errors related to asset distribution.
You need to have the right records in place when planning for your estate. Executors should be able to obtain the necessary information related to financial accounts, insurance policies, tax returns, and others.
Making these documents accessible is essential to ensuring that your assets are distributed according to your wishes.
The improper disposition of assets is one of the biggest issues that you and your family can face when planning for the future.
Understanding the needs of beneficiaries and working with an estate planning attorney to prevent improper disposition will secure you and your family’s financial wellbeing.