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Whether your estate plan is simple or complex, there are many details, often overlooked, that can undermine your plan’s effectiveness. Below we’ve listed ten common estate planning mistakes. Although these are numbered, there is no intention to indicate severity or prevalence.

1. Titling property jointly with your children as a substitute for a will. Unlike a will, a transfer of an interest in your property is irrevocable, which may prevent you from changing the disposition if circumstances change before your death. Also, titling your personal residence jointly can result in partial loss of the capital gain exclusion if it is sold before your death.
   
2. Failing to plan for the possibility of children getting divorced or having problems with creditors. Parents often have cause to regret having made outright gifts to their child when the child subsequently divorces and the ex-son- or daughter-in-law is awarded an interest in the gifted property by a court, or when the property is taken pur-suant to a legal judgment against the child. Such problems can be minimized through proper use of trusts or a business entity, such as an LLC.
   
3. Failing to make sure that all your assets pass in accordance with your wishes upon your death. Many types of assets (life insurance, IRAs, brokerage accounts) can pass to your heirs or others based upon beneficiary designations. The provisions of your will cannot change a beneficiary designation. Remember to account for things you’ve already designated. You should review your will, as well as all other beneficiary designations, when formulating your estate plan.
   
4. Underestimating the true value of your estate for federal estate tax purposes. For instance, many people are unaware that the proceeds of life insurance on their lives are includable in their taxable estates if they own the policies. This could bring their total estates to more than the amount sheltered from estate tax by the estate tax exemption ($2 million in 2006).
   
5. Failing to consider state death taxes in light of recent changes in the law. Many states have "decoupled" their death taxes from the federal estate tax, which means your estate could be subject to death tax in a state even if no federal estate tax is due. This could result in an unpleasant surprise upon your death, one that might be avoidable with proper planning. The laws of each state where you own property should be carefully reviewed to determine the potential exposure to state death taxes and how to minimize them.
   
6. Not recognizing that there is now a difference between the amount that can be transferred free from gift tax during your lifetime and the amount that can pass free from estate tax upon death. The maximum amount that can be given away during life without incurring gift tax is $1 million, whereas the amount sheltered at death is $2 million in 2006, scheduled to increase in increments to $3.5 million by 2009, with repeal of the estate tax (but not the gift tax) currently scheduled for 2010. Without further legislation, the estate tax will be reinstated at levels in effect prior to passage of the Economic Growth and Tax Relief Reconciliation Act of 2001. You can make yearly gifts up to the annual exclusion amount ($12,000 per person for gifts made by an individual and $24,000 for those made jointly by husband and wife) that don’t count against your $1 million gift tax exemption.
   
7. Failing to maximize the benefits of the income tax basis "step-up" at death. Low-basis/high-value assets should generally not be given away during your lifetime, since the basis for capital gain computation purposes will be increased to fair market value at death. If the asset is given away, the basis remains at the property’s original cost.
   
8. Failing to indicate your desired funeral ar-rangements. A pre-arranged funeral can greatly relieve family members from additional stress upon your death.
   
9. Failing to plan for disability. In the absence of adequate medical care directives, powers of attorney, or trusteeship of assets, costly and time-consuming court proceedings may be required in order to appoint a guardian or conservator to act on your behalf if you become disabled.
   
10. Not reviewing and updating your estate plan on a regular basis. Changes in the law and in your personal financial and family situations over time make it essential that you periodically review your estate plan to make sure it still carries out your wishes.
    

Some of these common mistakes can be avoided with a few, simple actions. Be sure to consult with your tax, estate planning attorney, and financial professionals. Early and thorough planning can help you reach your financial goals and leave a lasting legacy. $

Have you ever considered lending money to your child for a down payment on a new home, to bankroll a business venture, or for some other large expense? Many adult children seek financial assistance from their parents if they encounter difficulty securing a bank loan due to lack of a credit history or collateral. For their part, many parents want to help their children succeed in life and are willing to give them a financial boost if they have the means. Though most parent-child loans do not go awry, if a loan does sour, it can have serious consequences for unsuspecting parents. Here are four pointers to heed before lending funds to your child:

1. Document the Loan. If you expect the money to be repaid, consider treating the loan as seriously as a banker would by requiring the proper documentation. If you seal the deal with a handshake and the business later fails, you must be able to convince the Internal Revenue Service (IRS) you made a bona fide loan in order to deduct it as a bad debt. To give yourself a sound basis for a tax write-off, request the following:

• A note and written loan agreement
  
• Collateral or other form of security
  
• A repayment schedule and repayment records
  
• A plan indicating the loan will be repaid as scheduled
  
• Proof a business was solvent when the loan was made, if applicable

Proper documentation may also help you avoid other complications. For instance, if your child were to divorce, a written loan agreement identifying who is responsible for repayment, and on what terms, could prevent a former spouse from refusing responsibility for the debt or claiming the money was a gift. It could also keep an ex-spouse from obtaining—through the division of marital assets—a controlling interest in a company you funded.

2. Know the Rules. The IRS allows you to deduct bad debts only after you have tried to collect them by legal means, if necessary. So if you want to write off the loan, you must be prepared to take legal action to collect it.

If legal action is appropriate in your situation and you’re still unable to collect the loan, you may write it off as a short-term capital loss by subtracting the outstanding loan balance from your total short- and long-term capital gain for the year. If the loss exceeds your total capital gain, you may deduct it in $3,000 increments each year until it is entirely written off.

3. Treat the Bad Debt as a Gift. Instead of a lawsuit, you may have the alternative of treating the bad debt as a gift. In 2006, the IRS allows each taxpayer to give up to $12,000 per person per year free of gift and estate taxes. Thus, both parents together could offset an uncollectable debt with a combined gift of up to $24,000 per year with no tax consequences. (Any amount exceeding this limit may be subject to gift and estate taxes.)

4. Use Common Sense. Lending money to a child may have certain tax consequences for you, and it’s important to be prepared. Consider the odds of a successful follow-through on your child’s part. Think twice before lending money for a risky venture unless you are willing to part with it as a gift with possible tax consequences, if need be.

Supporting a child’s dream can be an exciting and rewarding experience for a parent. However, pay attention to potential tax traps and legal pitfalls before opening your checkbook, and seek professional advice. $

Owning property with another individual or partner may be a complex relationship. Because of the complexity, the way you agree to take title or ownership must be worked out in advance. Consulting with your legal professional can help you establish the ownership form in a way that will benefit you and your heirs. The four forms of co-ownership,one of which will be better suited for your particular circumstances, are as follows:.

Tenancy in Common

This is a form of co-ownership often used between unrelated persons. Tenants in common may own unequal shares of property. For example, one person could own a one-fourth interest and another could own a three-fourths interest as tenants in common. If the shares of the co-owners are not specifically designated, they are presumed to be equal or proportionate.

Tenants in common are said to hold "undivided" interests with the other co-owners. This means each co-owner owns a proportionate interest in the entire property. For example, if two individuals are equal tenants in common to a parcel of land, it is incorrect to characterize one co-owner as owning the west half and the other as owning the east half. Rather, both co-owners own a one-half interest in the entire parcel.

Joint Ownership

Joint ownership is a specific type of co-ownership with some very unique legal characteristics. Unlike a tenancy in common, where co-owners may own unequal interests, the legal interest of each joint owner is equal to the interest of every other joint owner. For example, if there are three joint owners, each joint owner owns an equal, undivided, one-third interest in the entire property. However, this proportionality does not necessarily carry over to the tax consequences of joint ownership.

The most important legal characteristic of a joint ownership is the right of survivorship. Right of survivorship means that when a joint owner dies, the surviving joint owner (or owners) automatically succeeds in ownership of the deceased joint owner’s interest in the property. For example, if there are two joint owners and one of them passes away, the surviving joint owner automatically owns the entire property. If there are three joint owners and one of them passes away, each of the two surviving joint owners automatically becomes one-half owner of the entire property. The survivorship rights of a joint owner are given precedence over the claims of the deceased joint owner’s creditors. This form of ownership may be common among married couples.

Tenancy by the Entirety

As This form of ownership is recognized by many states as a variation of joint tenancy that applies only to joint ownership between spouses. This special form of joint ownership is called tenancy by the entirety. A tenancy by the entirety generally has the same legal characteristics of a joint ownership with a few additional features. Normally, the protection against the claims of creditors that applies to joint tenancies at the death of a joint tenant is also available against the lifetime creditors of the tenant by the entirety.

Community Property

Married couples who own property in any of the following nine states are considered to have community property: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Regardless of whose name is on any ownership papers, such as a deed, any property accumulated during the marriage is "owned" by both parties. This includes cash, real estate, and any other assets that may be acquired.

Remember, splitting property, for any reason, is generally a difficult task. Therefore, the decision to purchase property with another party is one that may require careful consideration. $