Lifetime estate planning is a topic some people do not want to face. However, while facing mortality is daunting, it is something that will come to each person at some point. Estate planning is something everyone needs to do. What is involved with lifetime estate planning? Estate planning allow people to put their wishes into a legally binding form. It helps avoid problems that often arise after someone passes away. It helps those who are left behind to know what their loved one wanted. It avoids getting the courts involved with end of life and probate decisions.
Estate planning requires the individual to think about how things should go at the end of life. The person needs to consider what needs to happen if he or she cannot make medical decisions anymore. The person needs to consider how bills are going to get paid. He or she needs to think about how assets should be divided once the person has passed. If minor children are involved, the person needs to consider guardianship decisions. These are not easy things to consider, but necessary for managing both the expected and non-expected events in life. The Will
The most basic document involved with estate planning is a last will and testament. Wills can be simple or complex documents, depending on an individual’s circumstances. A simple will includes identifying information about you. It names your beneficiaries. It includes the person you want to act as executor to the will. It outlines who you want appointed guardian over your children. It indicates how you want your assets split. A tax-planned will is more complicated than a simple one. This kind of will involves planning so that the tax burden on a spouse and other survivors is minimal.
Someone that has a substantial estate may be subject to estate taxes if proper planning is not done. This kind of will usually involves setting up trusts and gifting assets prior to passing away. Revocable and irrevocable trusts At its most basic level, a trust is a relationship where property is held by one party for the benefit of another. When it comes to estate planning, a trust involves transferring assets to a third party, who holds those assets on behalf of the trust’s beneficiaries. Trusts come in two general forms: revocable and irrevocable.
A revocable trust means that, under certain circumstances, the person who created the trust can revoke the trust, and retrieve the assets, at some point before death. An irrevocable trust is the opposite. Once the assets are transferred into the trust, it is permanent. Gifting programs Another option for avoiding estate taxes is setting up a gifting program. The IRS allows an individual to gift another person a certain amount each year. In 2015, that limit was $14,000. The IRS also has limitations on how much money a single individual can gift over a lifetime without involving estate taxes.
In 2015, that upper limit was $5. 43 million. So, if a person dies in 2015, and has gifted a total of $6. 0 million over his or her lifetime, the estate will owe 40 percent in taxes on the $0. 57 million that went over that limit. Planning being incapacitated People often fall ill or are involved in an accident unexpectedly. If that person cannot make decisions on his or her own any more, who will make those decisions? This where durable financial and medical powers of attorney come into play. A durable power of attorney allows one individual to make decisions for another person if the second person becomes incapacitated.
Financial powers of attorney allow the trusted individual to use assets to pay bills, collect benefits, file taxes, or operate a business if the second individual cannot. Medical power of attorney allows the trusted individual to make medical decisions on behalf of the incapacitated individual. Another document to add is advanced care directives. This is a legal document which outlines the kind of medical care the incapacitated individual would approve or disapprove of. The Importance of a Good Estate Planning Attorney These are just a few of the documents you will want to create while you planning your estate.
One other thing you need is a good attorney. It is a mistake to try to create and execute any of these estate planning documents without the advice and guidance of an experienced estate planning attorney. The laws surrounding end-of-life, probate, inheritance and taxes are extremely complicated. The attorney can offer you advice regarding the estate, generation-skipping, inheritance, and gift tax implications your estate plan. If you have questions about estate planning, call Sprouse Shrader Smith at (806) 468-3300. You can also contact us through our contact form or stop by our offices at 701 S. Taylor Street, Suite 500, in Amarillo.
