7 Steps To Plan Your Estate Future

Establishing who will receive your assets in the event of your death or incapacitation is the process of estate planning. A thoughtful estate plan, which is frequently created with legal advice, can guarantee that your assets are distributed to your heirs and beneficiaries in a way that controls and reduces estate taxes, gift taxes, and other tax implications.

How to Create an Estate Plan to Prepare for the Future

Even though no one enjoys estate planning, it’s crucial to keep your plan current for the sake of your family. Some of the key details I prefer to go through with clients during the estate planning process are included in this article.

Who Should Participate In Your Estate Plan Review?

You can begin the procedure by consulting one of your reliable advisors. Although you’ll need to see an attorney along the process to produce documentation, your CPA can still be of assistance. Your CPA should be able to recommend an estate planning lawyer if you don’t already know one.

What function does your company have in your estate plan?

Your business will be revalued in your estate if you own one. You can specify how you want your business to be handled when you pass away using an estate plan. Do you intend to market it? If you give it to one kid, why not the other? Your estate plan can provide more details.

Are Your Digital Accounts and Files Accessible to Others Besides You?

Making ensuring someone other than you has access to your digital accounts and files is more crucial than ever.

Frequently, one person in the family is in charge of all financial records, paperwork, and online accounts. Your loved ones may struggle greatly to access items like bank accounts, investment accounts, and retirement plans if something awful occurs to you and you are the only one who has the passwords.

I advise all of my clients to store their passwords in a single, secure location by using a digital vault like LastPass. Make sure the people you care about know how to access your online safe.

The Technology Solutions Group provides advice on how to create strong passwords. Whatever you do, don’t name your password spreadsheet passwords.xls!

Why Should You Consider Charity Trusts Right Away?

Trusts created for general income tax or estate planning purposes are known as charitable trusts.

When someone sells low-basis stock with a significant gain, charitable remainder trusts are frequently created. They assist you in avoiding immediate gains tax.

For instance, if you purchased early shares of Facebook or Amazon, their value has increased dramatically. You can create a charitable remainder trust that defers the capital gains tax when you leave part of the shares to charity and receive a tax deduction rather than selling the stock in one big chunk and paying the gains tax all at once. More crucially, you can donate the remaining value to charity while keeping the majority of the value for yourself as a long-term income stream with low capital gains taxes.

There are additional approaches you can use to include charitable giving in your financial planning. Giving to a foundation, as an illustration, can be a useful income tax planning technique. Creating a foundation may enable you to reduce your income taxes.

Why Should You Take Into Account a GRAT?

For those who currently use a number of estate planning techniques, a grantor retained annuity trust, or GRAT, is a tool for estate planning. With a GRAT, a person can give their children or other designated beneficiaries the appreciation on assets that are appreciating while minimizing or completely avoiding gift taxes.

The way a GRAT works is as follows: if you have an item that is anticipated to increase in value, you can use a GRAT to maintain its current worth as well as the low IRS interest rates we are now experiencing, then donate it. If the asset increases in value, the increase will not be subject to estate taxes.

Moving assets with a low value, like stocks, to the next generation is a great idea if you will be paying a high estate tax in the future.

How Can a Lifetime Exemption Be Used for a Lower Valuation?

There is currently a $11 million estate tax exemption available to everyone. You might have $10 million in shares that you can donate, depending on the other assets in your estate. Giving the stock away is a smart move because it will keep any future appreciation out of your estate, but you also have the chance to negotiate a lower asset valuation.

You can limit assets and maintain control of them by including additional entities like a family limited partnership (FLP) or family limited liability corporation (FLLC). You are allowed to lower the gift’s value because the recipient has no control over it.

A family limited liability may allow you to donate a stock and bond portfolio while still receiving 20 to 30% of the value donated to your family.

What Steps Should You Take Following Your Estate Plan?

1. Prepare your estate plan. An existing plan should be updated. Make sure you have legal documents in place, such as wills, powers of attorney, and medical directives.
2. In case of an emergency, let your loved ones know how to access your online accounts and files.

7 Steps To Plan Your Estate Future

1. Create an inventory
2. Account for your family’s needs.
3. Establish your directives.
4. Review your beneficiaries.
5. Note your state’s estate tax laws.
6. Weigh the value of professional help.
7. Plan to reassess.

Important legal instructions are part of an estate plan that is full.

• A trust may be necessary. With a revocable living trust, you choose a trustee to oversee your assets and manage them for your benefit and the benefit of your beneficiaries.Your chosen trustee will be able to take over if you become ill or incapacitated. The assets of the trust pass to your chosen beneficiaries upon your death, avoiding the probate process, which would otherwise be used to disperse your assets. Another choice is to create an irreversible trust, which the creator cannot alter or revoke.
• A medical care directive, commonly referred to as a living will, outlines your preferences for medical treatment in the event that you are unable to do so for yourself. You can also grant medical power of attorney to a trusted individual, empowering them to make decisions on your behalf in the event that you are unable to. An advance health care directive, which combines these two documents into one, is occasionally used.
• If you become medically incapable of managing your finances, a durable financial power of attorney enables someone else to do so. When you are unable to, your appointed agent, in accordance with the document’s instructions, may act on your behalf in legal and financial matters. This entails accessing and controlling your assets as well as paying your obligations and taxes.
• If the thought of giving everything to someone else worries you, a limited power of attorney may be helpful. This legal document accomplishes what it claims to: It places restrictions on the authority of your designated representative. For instance, you might give the individual the authority to sell a certain stock or sign documents on your behalf at the closing of a home transaction.
• Take caution who you give your power of attorney to. Your financial security and possibly your life could be in their hands, literally. It might be a good idea to designate separate individuals to handle the medical and financial representation, along with a backup for each in case your first pick is unable to act when it counts.