1. NOT UPDATING OR REVISING YOUR ESTATE PLAN

In Georgia, a Will is automatically revoked upon the occurrence of certain events, such as marriage, divorce, or the birth or adoption of a child. Also, you may have written a Will years ago, when you had very little assets. Now, you have accumulated some assets, changing your tax and financial picture. Also, given the current risks of long-term care and the decisions made on how to pay for it, the traditional estate planning methods will need to be reconsidered, revised and updated to prepare for this current and ever increasing risk.

So, when there are changes in your family (birth’s, deaths, adoptions, marriages), and more important, when there are changes in your financial picture, your estate plan should be updated.

2. FAILURE TO CONSIDER THE IMPACT OF LONG-TERM CARE.

People are living longer. Even those in the age group of 85 and over. But just because people are living longer, does not necessarily mean they are living healthier. Currently, the risk of needing long-term care is 45% for those over the age of 65, and it increases as you get older. That means 4 out of 6 people in Georgia will face long-term care in their lifetime.

WHO PAYS?

The average cost of a nursing home is $40K A YEAR ($3,333 PER MONTH OR $111 PER DAY/ $55,000 PER YEAR IN NORTH GEORGIA). These figures are expected to DOUBLE over the next ten years, and these figures do not reflect the cost of care being provided in-home ($4,500 per month current), or in an assisted living facility ($2,800 per month for basic living). 45% of all Georgians over the age of 65 could not afford to pay for a one year stay, without selling their homes.

The Board of Department of Community Health (the government agency in charge of Medicaid) recently reduced Medicaid spending for fiscal year 2003 by 27.7 million dollars, and another 6-7% cut is expected next year.

3. FAILURE TO CONSIDER THE IMPACT OF ESTATE TAXES

The Bad news:

If a person dies owning assets in excess of $1,000,000, their estate (i.e., children) pays an estate tax starting at 37% and going up to as much as 55%. This tax must be paid within nine (9) months of death, and must be paid before anyone receives a penny.

The Good news:

There are ways to reduce or even eliminate this estate tax. Two simple steps can be taken which will allow you to save hundreds of thousands in taxes, while you retain control over your assets and provide for your spouse and children at your death.

4. IMPROPER BENEFICIARY DESIGNATIONS

Assets such as life insurance and retirement plans require specific beneficiary designations. Improper designation of beneficiaries, or failing to change those beneficiaries when significant events happen in your life, creates a situation where the life insurance or retirement plan asset is left to the right the person at the wrong time or the right person at the right time, but in the wrong amount.

5. HAVING ASSETS JOINTLY OWNED WITH ANYONE OTHER THAN YOUR SPOUSE

With assets that are jointly owned, income and estate tax problems are created. In fact, it can create a double estate tax problem. Besides the adverse tax consequences, there are also non-tax consequences of owning property jointly, such as asset protection problems, making provisions in a will ineffective, losing control of property, or the loss of the ability to manage asset for use of one or both of the joint holders in the event of sickness or incapacity.

6. IMPROPER USE OF LIFE INSURANCE AND RETIREMENT PLANS

Life Insurance and Retirement Plans (401(k) and IRA’s) are the most common asset. Yet, if not handled properly in your estate plan, Life Insurance and Retirement Plans can be the most dangerous assets. Poor planning with Life Insurance and Retirement Plans results in most or all of these assets being lost to taxes. Life Insurance is an essential part of an estate plan, but Life Insurance is included in the calculation for determining whether an estate is taxable or not. If life insurance is not used properly, it can result in easy money for Uncle Sam. Double taxation is the result of poor planning with Retirement Plans.

7. LACK OF LIQUIDITY IN THE ESTATE

Not having enough liquidity in the estate means that assets must be sold to pay debts, taxes and expenses of administration. Do you want your family or the IRS and other creditors to receive your estate? Having enough liquid assets to utilize for payment of long-term care expenses is also important to consider. If your assets are in things like real estate or businesses, then these assets may have to be sold at distressed values to pay for long-term care expenses.

8. CHOOSING THE WRONG PEOPLE TO HANDLE YOUR AFFAIRS.

Choosing the wrong person or persons to handle your affairs can be as big as a mistake as not choosing someone at all. Having the right people to help you with all of your affairs can help save a lot in financial costs, not to mention reducing family disputes and squabbles.

9. HAVING A WILL AS THE ONLY PART OF YOUR ESTATE PLAN

A Will controls the disposition of your assets at your death. What happens if you become unable to take care of yourself and your assets before you die? Unless you take the proper steps, if you become sick or incapacitated, it will be a difficult, costly and very burdensome process for your family to be able to use your assets for your benefit or to make decisions concerning your medical or personal care.

10. ESTABLISHING AN ESTATE PLAN BASED ON COST ALONE

The time to discover that you got what you paid for is not after you have died or become unable to take care of yourself - leaving your family to pay the price. Choose a professional who has the experience and knowledge to establish an estate plan specifically designed for your needs and will grow and change with you and your family.