Sometimes impressions about certain subjects are passed down over the years, and the information that you get is outdated. With this in mind, we are going to provide five estate planning tips for the modern family in this entry.
1. You are not too young to put a plan in place.
Surveys show that the vast majority of adults do not have estate plans, and this even applies to people in their 50s. Life expectancy in the United States is about 78 years overall, and it reaches into the mid-80s once you reach the age of 65.
This does not mean that you should wait until you are 70 before you start thinking about planning. People pass away before their time each and every day, and you never know what the future holds. If you have a spouse or dependent children, estate planning is an absolute must.
You probably say that you would do anything for your family, but a lot of people who would echo the sentiment go through life without any estate planning documents. When you plan your estate, you make sure that your family will be provided for.
2. Review your plan periodically.
The estate plan that you put in place initially will be based on a snapshot of your life at that time. Over the years, things in your life can change, and new legislation sometimes has estate planning ramifications.
You should recognize that estate planning is an ongoing process, and you should be prepared to make adjustments over the years when they become necessary.
3. Don’t create a will and call it a day.
A lot of people think that all you need is a simple will unless you are extremely wealthy. In reality, this is just a myth.
There are complicated irrevocable trusts that are used by high net worth individuals that are exposed to estate taxes or by individuals with more modest estates who are concerned about nursing home costs. But even if you do not have these concerns, a revocable living trust can be the ideal alternative to a simple will because of the significant advantages discussed in other posts.
In addition to the revocable living trust, there are other trusts that can be used to satisfy certain specific objectives. For example, you can use a supplemental needs trust to leave an inheritance to a person with a disability without impacting their eligibility for Medicaid.
This is one of the reasons why you may want to use a trust instead of a will to satisfy a particular objective, but there are others. You should discuss your objectives and your family dynamic with an estate planning attorney before you decide whether a will is right for you.
4. Estate taxes probably won’t be an issue.
We get questions from people who have concerns about the taxes that their loved ones will pay when they receive their inheritances. Fortunately, they are pleasantly surprised when they hear the answers.
For the most part, inheritances are not considered to be taxable income. Two exceptions are traditional individual retirement accounts (IRAs) and annuities.
If you inherit a traditional IRA, you would be required to pay taxes on the distributions, but distributions from a Roth account are tax-free. If you inherit an annuity, the premiums paid in are not taxable, but the growth is.
There is a federal estate tax, but it is currently only applied on the portion of an estate that exceeds $11.7 million so very few families have to pay the tax. There are serious proposals to reduce this threshold. Some states have state-level estate taxes, but we do not have them in Kentucky, North Carolina, or South Carolina. Kentucky does have inheritance taxes on some beneficiaries, which are discussed in another post.
5. Don’t overlook incapacity planning.
In addition to the financial part of the equation, you should address end-of-life issues when you plan your estate. You can state your life support preferences in a living will, and you can name someone to make other types of medical decisions on your behalf in a durable power of attorney for health care.
If you have a living trust, you can name a disability trustee to act as the administrator in the event of your incapacity. A durable power of attorney for property can name a representative to manage property that is not held by a trust.
We Are Here to Help!
Today is the day for action if you are going through life without an estate plan. You can schedule a consultation at our office in Ashland, Kentucky if you call us at 606-324-5516; the number for our Florence, Kentucky office is 859-372-6655.
Our number in Charlotte, North Carolina or Huntersville, North Carolina is 704-944-3245, and you can use our contact form if you would rather send us a message.
- 10 Reasons You Might Need an Estate Planning Attorney - January 5, 2022
- How to Gift to Your Grandchildren in Your Estate Plan - January 3, 2022
- What Happens If I Leave Property Out of My Living Trust? - December 14, 2021