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Poor man's will not without potentially serious problems

The mistakes that can be made in estate planning are many, though there are some common ones that tend to pop up more often than others. Some of the obvious ones are: not doing any estate planning; failing to periodically update an estate plan; failing to engage in adequate tax planning; and failing to keep beneficiary designations updated.

Another common estate planning error involves the use, more specifically the overuse, of jointly held property. Many people choose to forego having a will or trust drawn up because they have placed all their property in joint tenancy or joint accounts. The approach is sometimes referred to as being the "poor man's will," which is an unfortunate way of looking at it. The reality is that while it may avoid the expenses of formal estate planning, owning all one's property jointly can present a variety of problems.

From a tax perspective, jointly titled property can be subject to both federal and state gift taxes, and may be subject to double federal estate taxation in some circumstances. From a nontax perspective, jointly held property can be too much for some survivors to handle, particularly if the survivor is a minor or has special need. Also, jointly held property goes completely into the control of the survivor with survivorship rights, who can dispose of the property in a way contrary to the wishes of the deceased.

Of course, it is nice to not have to work with an attorney and pay money to have one’s estate plan mapped out, but doing so allows an individual to address a variety of concerns that are simply not addressed when one puts all one’s assets in joint accounts and in joint titles. The benefits of that approach are short-lived and short-sighted. A thorough estate plan will address each of these concerns and ensure that various estate planning goals are harmonized within an overall plan.

Source: Life Health Pro, “10 Common estate planning mistakes (and how to avoid them),” Stephen R. Leimerg, November 7, 2013.

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