Right now, the federal estate tax exemption is so high as to be a non-issue for most taxpayers, but this will not always be the case, and there are also state estate taxes to consider. Regardless of taxes, there are other reasons why everyone needs to have an estate plan, affirms a recent article from mondaq titled “Do I Really Need an Estate Plan?” The short answer is yes, you do.
The first thing a will does is distribute your assets according to your directions. If you have grandchildren, there are ways for you to gift them assets and minimize taxes, but you’ll need to plan for generation-skipping taxes.
If you own a business, you need a succession plan to align with your estate plan. Will family members become owners, or will the business be sold?
Does the family include a disabled or an individual with special needs? A special needs trust can add an extra layer of resources. Guardianship planning needs to be done for the parents, and guardians are named when the parents can no longer care for the person.
The will is also used to name an executor, the person to handle all the decisions you express in the will and carry them out.
Gifting is another part of your estate plan. If you have any charitable organizations or individuals outside your family who you’d like to make a gift, this can be done through your will or several gifting strategies.
The current federal estate tax exemption is set to end in 2025 and revert to 2017 levels. To protect your estate and heirs, tax planning should be done well in advance.
A review of life insurance should be part of your estate plan. Do you know who your named beneficiary is on your life insurance policies? If your estate is the beneficiary, your estate’s value may exceed the federal or state estate tax limits.
Many people today create an ethical will. This is not a legally binding document; instead, it is used to express your values and your wishes for heir’s futures. It may also be used to give them insight into how your will was structured and why. If there is controversy in the family, an ethical will or statement of intentions may help bolster your will if there are any legal challenges.
Your retirement and workplace benefits have beneficiaries named in the event of your death. Do you know who they are, and do you still wish for those named to be your beneficiaries?
Estate planning includes addressing incapacity and illness. You’ll want a Power of Attorney for someone to act on your behalf if you are sick or injured and cannot handle your finances. You’ll also need a Health Care Proxy for someone who will be empowered to speak with healthcare personnel and make care decisions for you if you cannot.
Without a comprehensive estate plan, the difficulties facing your loved ones upon your illness and death will be magnified. Yes, you need an estate plan. The sooner, the better. Speak with an estate planning attorney to get the process started.
Reference: mondaq (Aug. 24, 2022) “Do I Really Need an Estate Plan?”