Some individuals’ estates create difficulties for their surviving families — while the estates of many others do not. The difference is usually due to gaps in planning.
Carefully making advance arrangements for the assets you will leave behind can mean that your family will not experience problems with your estate for reasons such as missing documents, lack of tax planning, or a funding omission that prevents a trust from working as intended.
Document Gaps Missing or outdated documents may result in your assets not being distributed as you intended.
Will
A will is the foundation of an estate plan. Yet some individuals never get around to writing a will — or they create one, but let it become outdated. For example, they may not change it after a marriage, a divorce, or the birth of a child. Or the will may name an executor (or personal representative) who either refuses to serve or is unable to do the job well.
Asset Titles The way your assets are titled is also important. For example, life insurance proceeds become part of the policy owner’s estate. Having someone else (or a trust) own the policy can keep the insurance money out of your estate.
Beneficiary Designations Although their family situation changes, many individuals don’t change the beneficiary designations they’ve made for their 401(k), IRA, or other retirement assets. Simply reviewing and revising your beneficiary choices periodically can prevent potential estate problems.
Planning Gaps If you have a substantial estate, taxes may become a costly issue. The federal estate tax exemption amount is $5 million, indexed for inflation after 2011 ($5.25 million for 2013). The highest tax rate is 40%. If you fail to plan for the possibility of estate taxes affecting you in the future, you may unnecessarily compromise your family’s inheritance.
Follow Up
Once you have a plan in place, it’s important to follow through on it. For example, as part of your planning, you might decide to create a living trust. But securing the advantages of the trust requires completion of the trust arrangements, including the transfer of assets to the trust. Unfortunately, individuals sometimes create a trust but, for one reason or another, do not take the final funding step.
Estate Planning Experience
While it’s all but certain that your financial and family situations will change in the future, it’s imperative to periodically review your estate plan to make sure it still meets your needs. If you have questions or would like assistance with your current estate plan, please
contact us online or call 941-366-7222.