For some people, a will is all that’s needed to make sure your assets are distributed according to your wishes after your death. In other situations, an estate planning attorney is necessary to help figure out the best way to apply estate tax laws while ensuring that everything goes smoothly, and your heirs aren’t stuck paying too many taxes and fees.
It’s a common misconception that only the super wealthy need an estate plan, but there are actually a lot of situations in which a will isn’t enough. It’s not necessarily about the value of your assets but rather what they are and where they’re located. While estate planning is not for everyone, there are a lot of people who can benefit.
What Is Estate Planning?
A lot of people think that estate planning is the same as having a will, but there are some pretty significant differences. Wills are straightforward documents that put forth how you want your property distributed or who you want to care for your minor children. If you don’t have a lot of assets, a will might be enough to make sure your wishes are respected after you die.
An estate plan is similar, but it goes much further than a last will and testament. With the help of an estate planning attorney, you can establish the distribution of assets while also helping your heirs take advantage of laws and other practices that can help them pay less in fees, taxes, and court costs. You don’t necessarily need a large estate to take advantage of estate planning. What you’re passing on to your heirs is just as important.
Does Everyone Need an Estate Plan?
Everyone needs a will, but not everyone requires an estate plan. If any of the following situations apply to you, you may wish to consider looking into estate planning costs and working with an attorney to figure out the best method to distribute your assets.
How Large is Your Estate?
There are a lot of tax implications when it comes to planning your estate. If the value exceeds the maximum federal estate tax exclusion, an estate plan is necessary to determine the survivor’s exclusion as well as what happens in the event of simultaneous death.
Another thing to consider is that a lot of states now have their own estate tax laws. Since every state is different, this can get a little difficult. An estate planner can help what laws apply, particularly if there are businesses and properties in multiple states across the country.
Do You Have Children?
If you have young children and significant assets, you should consider an estate plan. While a will gives you the opportunity to name a guardian, an estate plan is necessary if you wish to name a conservator. Most state laws require a conservator be named to manage the inheritance of children until they are 18 or 21 years old.
Another option for minor children who stand to get a large inheritance is estate planning trusts. A professionally managed trust makes sense for financial, real estate, life insurance, and retirement assets. It allows the money to be invested and managed by a conservator who has the best interests of the children in mind. When in the hands of a professional, they could produce much more growth in the long run.
Do You Have Varied Assets?
In estate planning, it’s not necessarily the total of all assets that matters so much as what kind of accounts you have and where your investments are located. One good example of this is if you have an IRA. Both traditional and Roth IRAs can be stretched to last the lifetime of the beneficiary. If you’re leaving that account to a young child or grandchild, it could mean decades of tax-free growth. An estate planning attorney can help you find out the best way to manage assets like this, so your heirs get the most use out of their inheritance.
Do You Own a Business?
There are a lot of options for handing down a business as part of your estate. If you plan to keep it in the family, an estate attorney can help figure out the easiest way to do so using a family limited partnership or LLC. This applies to large corporations as well as small family businesses of franchisees.
Philanthropy
For an estate with significant assets where the owner wishes to give a considerable amount to charity, an estate plan provides a lot of options. For example, charities can be named as direct beneficiaries, or a trust can be set up to benefit that charity. Doing charitable giving the right way could mean both smaller capital gains taxes and estate taxes and even income tax deductions.
Review and Update Regularly
There are a lot of cases in which you should reevaluate and update your estate plan.
If you put it together when you’re relatively young and have small children, evaluate your estate planning checklist regularly. As time goes by, the need for trusts and conservators lessens as your children get older and become adults. Your finances will change and grow, too, so make sure you keep your estate plan up to date.
There are some special circumstances to consider, too. If you get remarried and have stepchildren, you may wish to include them in your estate. Alternately, you may wish to make sure your children’s inheritance is protected if your former spouse remarries. An estate attorney can help you set to prepare for these kinds of situations.
It’s also possible that you’ve had a falling out with one of your heirs since you put your estate plan together. In this case, it’s very important to make changes if you have decided to change their inheritance. It will save your family a lot of pain and fighting when your estate is being settled, particularly if there are already hard feelings.