January 1st has come and gone, but hopefully your New Year’s Resolutions have not done the same. Estate planning is one thing that should definitely make it onto your list of resolutions, whether you have already begun to plan or it is time for a review. The following are a few reasons to actually check estate planning off your to-do list in the coming months.
Provide support for your spouse and children. Estate planning can help take care of your family when you are no longer able to do so yourself. Besides providing financial stability for your loved ones, an estate plan can help protect your children throughout their lifetimes. When your kids are young, you should appoint a guardian if something should ever happen to you. You will also most likely want to plan so that you have the financial capacity to send your kids to college. And once you have passed, an estate plan can help your children enjoy a legacy that includes your values as well as your assets.
Preserve your wealth. Not only can an estate plan provide support for your loved ones, it can also help you protect your wealth for later generations. Smart estate planning will consider federal and state tax law in regards to your specific financial situation to ensure that future generations of your family will receive the most value from the assets you worked hard to build. Specifically, take advantage of the federal annual exclusion amount, which allows you to make gifts up to $14,000 without being subject to a tax. While the annual exclusion amount did not change when 2016 rolled around, the federal lifetime gift and estate tax exclusion did. Accordingly, an individual can make a gift or transfer estate property without taxation up to $5.45 million during his or her lifetime. Gifts are not the only way to transfer assets—a trust is an effective, tax-advantageous method as well. For example, if a parent transfers his house by gift to his child as he nears death or incapacity, the child must pay capital gains tax if he decides to sell the house. Yet if the parent transfers the title to the house through a trust, for example, the child will be able to avoid a capital gains tax or greatly reduce it (depending on when the home is sold) through what is known as a step-up-in-basis. With this latter option, the parent better preserves the family wealth for future generations.
Ensure that your wishes are carried out. An estate plan will guarantee that you are in control of your finances and important health care decisions. Using an advance medical directive, you can identify the individuals who you would like responsible for your health care decisions should you ever become unable to make them yourself. Making your end of life decisions clear will remove the burden of making emotionally difficult decisions from family and friends. It will also avoid the possibilities of strife and conflict, allowing your loved ones to properly grieve for you instead of arguing over your intentions. Additionally, a durable power of attorney will allow a conservator of your choosing to control your finances in the manner you determine, if you become incapacitated. Otherwise, a court might appoint someone you do not know or trust, and who lacks an understanding of your true wishes.
Make long-term care arrangements. Most of us will require long-term care at some point, which can be expensive and even financially devastating. By making arrangements for your long-term care in advance, this planning won’t become a burden to your family or break the bank.
Avoid family feuds. Everyone has heard at least one story of family members fighting over inheritance money. The latest family inheritance feud to hit newsstands was between Robin Williams’ three kids and his widow. To avoid inheritance feud drama and ensure family harmony, clearly delineate who will receive what from your estate.
Review beneficiary designations. Identify the beneficiaries who will receive your assets under your life insurance policies, retirement accounts, investment accounts, and other financial vehicles. Without a beneficiary designation, state law will govern, which could mean that your assets won’t end up where you intended or will return to your estate and be depleted by taxation. If it has been awhile since you first made your beneficiary designations, you should update them so that they comply with your current wishes.
Whether you are just beginning to think about your estate plan or believe it may be time for a review, Snyder Law can help. We can sit down for a complimentary consultation so that you can plan to protect your family today and in the future. Because you Love Much, and Dream Big, let us help you Plan Well.