Getting Your Estate in Order

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A good estate strategy will ensure that your final wishes are carried out in the event of your death and your assets are transferred to your heirs in a tax efficient manner.  Going through the process of answering the following questions will help you review and organize your financial information so that you are in position to make an estate plan:

  1. What is the value of your estate? Calculate the value of assets you currently own including benefits that will be paid after your death, such as life insurance proceeds, retirement and pension benefits. For each asset, list the estimated current market value, how the asset is titled, and the named beneficiaries. Also list any debts and liabilities that will have to be paid from those assets. Subtracting the debts and liabilities from the assets will give you an estimate of your estate’s current value.
  2. What are your estate planning objectives? Decide who should inherit your assets and how your assets should be distributed. You can bequeath assets outright giving heirs immediate control, or you can place assets in trust so you control how and when the assets are distributed. Business owners should also consider succession planning for the business.
  3. Who will you designate to carry out your estate plan? You will need to name an Executor in the Will and an Agent in your Advance Medical Directive and Durable Power of Attorney. Depending on your specific situation you may need to name a Trustee and a Guardian of your minor children. To add flexibility to your estate plan it is best to name your first choice and at least one successor.
  • Executor – administers your estate through probate court, locates and values all assets, pays the debts of your estate and distributes estate assets to your heirs.
  • Trustee – manages your trust and distributes the income and principal to heirs.
  • Guardian for minor children – takes physical custody of your children when you die.
  • Agent for durable power of attorney – handles your finances, business and legal interests.
  • Agent for advance medical directive – makes health care decisions if you are unable.
  1. Do you have options to minimize taxes? With the estate tax exemption and maximum estate tax rate subject to change in the future, the amount and whether estate taxes will be owed by your estate will depend on the year you die. Since you can’t predict that, your estate plan will need to provide flexibility. Consider the following strategies:
  • Trusts can reduce estate taxes, control asset distribution, make gifts to charities, provide for your incapacity, protect heirs, avoid probate, provide for professional management of assets, and make provisions for minors and heirs with disabilities.
  • The unlimited marital deduction allows you to leave any amount of your estate to your spouse without paying estate taxes. But simply leaving all your assets to your spouse may create an estate tax burden when he or she dies. You should consider using your estate tax exclusion by putting some assets in trust for other heirs or gift or distribute outright to other heirs.
  • In 2019 tax-free annual gifts of up to $15,000 per person ($30,000 per person if the gift is joint with your spouse) can be made and these gifts are not counted as part of your lifetime gift tax exclusion or as part of your estate tax exclusion. An annual gifting program can remove significant assets from your estate and minimize or eliminate estate tax.
  • If you can’t totally avoid estate taxes you need to provide for them as many large estates are cash poor, making it difficult for heirs to pay the estate taxes. A life insurance policy can fund the taxes and, if properly structured, your beneficiaries may receive the proceeds without paying income or estate taxes.

Plan your estate now to help ensure your assets are properly distributed with minimal estate tax burden.

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