Estate & Legacy Planning
Although congressional action has effectively eliminated federal estate and gift taxes for all but the wealthiest Americans, there is still a vital need to do estate planning.
Why? There are several key reasons: (1) to be sure that all of your wishes are followed after death; (2) to plan for state inheritance or estate taxes, if you live (or own property) in a state which levies such a tax; and (3) to plan in advance how to pay for any estate settlement costs. Federal estate tax law may have changed, but estate planning still matters.
At a person’s demise there are certain typical problems which, if not planned for, create a burden on those who are left behind. Proper estate planning can eliminate or reduce these problems.
Financial Burdens
- Estate settlement costs are too high: These costs consist primarily of probate fees and death taxes.
- Probate fees: These are generally paid to the executor of the estate and the attorney who assists with the probate.
- Death taxes: Estates that exceed certain amounts may be subject to both state and federal death taxes.
- Estate assets are improperly arranged:
- Liquidity: There are not enough liquid (cash type) assets to pay estate settlement costs.
- Cash flow: There is not enough income to care for loved ones left behind, e.g., spouse and minor children
Transfer of Assets
- Estate assets may be subject to probate delays and expense
- Assets transferred to minors may be in cumbersome guardianship accounts until they attain age 18 (or 21 in some states) and are then distributed outright to the children. A court supervised guardianship may be required.
- Additional death taxes may be paid because there was no pre-death planning.
- Without planning, estate assets may not pass to the intended heirs.
Care of Minors
- Guardians: Parents can nominate a guardian for their minor children in a will
- Asset management: If the wrong persons are chosen to manage the assets left for the minors, the assets may be lost or unnecessarily reduced.
4 Elements of an Estate Strategy
When Special Care Is Needed: The Special Needs Trust
Estate Management 101