Estate Planning Basics
January 29, 2018 by Hannah Thoms
There is really only one sure thing in this life, and that is that someday it will end for each of us. So, as you go through life, create a family, and build wealth, at some point you must address how you want your possessions distributed after your death. This process is commonly known as estate planning, and can include a will, as well as other components that enable your wishes to be carried out. No matter the size of your “estate,” it is essential that a formal plan be in place so that your assets are left to the people or organizations of your choice.
If you are unsure about how to create an estate plan, you are not alone. It can be a daunting task and may best be accomplished through the coordinated services of accountants and attorneys. But a basic level of knowledge can help you better understand your choices and make decisions that most appropriately fit your needs. Here a few things to know about estate planning that will help steer you down the right path.
What does “estate” really mean?
Your estate is literally everything you own. This includes life insurance policies; real property; bank accounts; stocks, bonds, and other types of securities; and personal belongings such as vehicles, jewelry, and art.
What are the possible components of an estate plan?
An estate plan can have many different components, each created to accomplish a specific task. For example, you can create a will that distributes your possessions according to your wishes; you can preplan your funeral and establish how it will be paid for; you can direct how medical decisions will be made on your behalf if you become incapacitated; and you can establish trusts that enable your property to avoid probate. Your accountant and attorney team can help you with your estate plan.
At what age should I create an estate plan?
No two people have the same life situations so there is no single “right” age, but the sooner you do it the better. That said, however, several important life milestones should trigger you to consider creating or reviewing your estate plan.
#1 Having children.
Once you start a family, you should at least have a will that designates a legal guardian for your children This person should be capable of giving consent for medical care; overseeing the purchase of personal needs such as food, clothes, cars, etc.; arranging for your children’s education; and managing their financial assets.
#2 Middle age.
When you reach middle age, you are likely well on your way to achieving your life goals. If you haven’t already created an estate plan, don’t procrastinate any longer. This is an age where your life and assets may be changing, so this is one of the best times to take a good look at your plan for your future.
#3 Senior Citizen or Disabled.
When you become a senior citizen, or anytime you suffer a catastrophic injury or illness, an estate plan becomes immediately essential. Planning for your medical needs, funeral arrangements, and distribution of your wealth can no longer wait. This is especially true if there is any possibility that you will lose the ability to make decisions for yourself.
Do the new tax laws impact estate planning?
Yes. Changes in the Tax Cuts and Jobs Act of 2017 that you should discuss with your accountant and attorney team include:
- The temporarily doubled gift estate tax exemption and the generation-skipping transfer tax exemption (increased from $5,600,000 to $11,200,000 in 2018).
- The new higher adjusted gross income limitation for deductions of cash donations to public charitable organizations.
- Changes to the Kiddie Tax including the child’s net unearned income would be taxed the same as the brackets that estates and trusts use if their income is above $12,500.
- Permanent expansion of the use of 529 savings plan assets, now up to $10,000 per child can be distributed annually to cover the cost of sending a child to public, private, or religious elementary or secondary school, per child.
This is very high-level look at estate planning, and the experts at Gordon Advisors can provide greater detail to help you create your estate plan. We will work closely with you to understand your long-term goals, short-term needs, and everything in between. Contact us today to find out more about our comprehensive estate planning services.