24th Jul 2012
You wouldn’t want to leave your family intestate when that inevitable time comes. That’s why you have to have foresight and protect their future by preparing and arranging for the distribution of your properties or estate. That is what estate planning is all about—properly taking care of your properties that you leave behind to your loved ones, whether they are family or friends.
There are things you should consider in estate planning to minimize uncertainties over the administration of a probate and get the most out of the value of the estate by reducing taxes and other expenses.
1. Identify a temporary guardian to take care of your children just in case you are unable to do so. Appointing permanent guardians will be specified in your will and will take effect on your death. There are available documents that will fill the void left in most estate plans.
2. Everyone over 18 years of age needs an estate plan. Encourage your children, friends and relatives to have an estate plan. It doesn’t need to be complicated. Besides, incapacity and death aren’t just for old people.
3. If you have pets, consider setting up a trust for their care so they won’t be put in a shelter or put to sleep.
4. Consider using an asset protection trust to protect your children’s inheritance from divorce, bankruptcy, and lawsuits.
5. Identify who gets what. If you fail to do so in a will, laws governing your domicile will determine who gets your assets, including your non-financial assets.
6. Think of ways to minimize taxes on the amounts your beneficiaries will inherit by using tax-efficient strategies. A common practice is leaving your taxable assets to charitable institutions and your tax-free assets (such as Roth retirement accounts, life insurance and after-tax savings) to your other beneficiaries. Another practice to reduce your taxable estate is by gifting amounts to your beneficiaries while you’re still alive—nontaxable gifts are under $13,000 for each beneficiary.
7. Most often than not, your beneficiaries stand to lose a large amount of money to estate and income taxes. Consider offsetting taxes with the proceeds from your life insurance. For example, your estate planner has estimated that your beneficiary will owe the government $1 million in estate and income taxes; you can buy a life insurance plan for $1 million and name the affected party as the beneficiary. Life insurance proceeds are tax-free so the entire $1 million can now be allotted to pay the taxes owed.
Learn more on the benefits of estate planning and how to efficiently make it work for your beneficiaries by working with an estate planning attorney. It is best to work with a local attorney for he/she is more knowledgeable with the laws of the area or state where you reside.