Estate Planning

Answers to basic estate planning questions.

We recommend that you work with experts (state attorneys, certified public accountants and financial planners) to create an estate plan. While the articles on this website are not legal or tax advice, they contain basic information to help you and your team plan. Because estate planning is not only about reducing taxes, but also about ensuring that assets are distributed as desired, both now and afterward, you should consider the following three questions before you begin estate planning.

Who should inherit your assets?

If you are married, you should consider your marital rights before deciding who inherits your assets. States have other laws designed to protect surviving spouses. If you die without leaving a will or living trust, state law will determine how much you give to your spouse.

Even if you have a will or living trust, if you give your spouse less than state law deems appropriate, the law may allow survivors to receive more. After considering your spouse’s rights, ask yourself the following questions:

Should your children share your property equally?
Do you want to include grandchildren or others as beneficiaries?
Do you want to leave your assets to charity?

Should they inherit any assets.

Special issues may be considered when certain types of assets are transferred. For example:

If you own a business, should the stock only go to your children who are actively involved in the business? Should you reward others with assets of similar value?
If you own rental real estate, should all beneficiaries inherit it? Do they all have real estate management skills? What are the cash needs of each beneficiary?

When and how should they inherit the assets?

To determine when and how a beneficiary should inherit an asset, you must focus on three factors:

The potential age and maturity of the beneficiaries.
These are the financial requirements you and your spouse need in your life.
Tax impact.

A full legacy provides simplicity, flexibility and some tax benefits, but once an asset is transferred, you have no control over what the beneficiary does with the asset.

Trusts can be useful when the beneficiary is young or immature, when your estate is large, and for tax planning reasons. It can also provide individual beneficiaries with limited professional opportunities to manage assets.

Transfer of assets upon death.
There are three main options for transferring assets after death: a will, the standard method; a life trust, which is rapidly gaining popularity; and beneficiary designation for assets such as life insurance and IRAs. To learn more about wills and trusts, visit Estate Planning – Transfer of Assets at Death – Wills and Living Trusts.

Choose an executor or trustee.

Whether you choose a will or living trust, you must also choose who will administer the disposition of your estate – an executor or personal representative and, if you have a living trust, a trustee. An individual (such as a family member, friend, or professional advisor) or an institution (such as a bank or trust company) can perform these functions.

Many people designate both individuals and institutions to use their collective expertise. What do executives and personal agents do? He or she serves your autopsy and has several basic responsibilities, including:

• Manages assets and distributes assets to beneficiaries.
• I make certain tax decisions.
• If you pay real estate debts or expenses.
• Make sure you get all types of life insurance and retirement benefits.
• File the required tax returns and pay the appropriate federal and state taxes.

Whatever your choice, make sure your executor, personal agent or trustee is willing to help. Also consider paying a reasonable fee for the service. The job is not easy, and not everyone wants or will take on that responsibility. If the first choice can’t be made or you don’t want to make it, prepare an alternative.

Usually a spouse, child, or other relative is designated as the doer, and he or she can hire the professional help you need. Finally, make sure that the executor, personal agent, or fiduciary does not have a conflict of interest.

For example, think twice before choosing a second spouse, children before marriage, or someone who owns part of your business. The personal goals of the co-owner of the business may be different from those of the family, and the desires of stepchildren and stepchildren may conflict.

How much is your real estate worth?

Start by listing all assets and their value, including cash, stocks and bonds, promissory notes and mortgages, pensions, retirement benefits, personal homes, other real estate, business interests, life insurance, cars, artwork, jewelry, and collectibles.

If you are married, make a similar list of marital assets. And be careful how you list your assets so that you include them accurately on each spouse’s list. If you were insured at the time of death, the amount insured is usually included in the value of the estate.

Remember, this is income. A $1 million term insurance plan that is not worth it while you are alive will suddenly become worth $1 million after your death. If your estate is large enough, much of that income can be spent as a tax on the government, rather than on the beneficiaries of your choice.

How does the estate tax system work?

Here’s a simple way to calculate your estate tax. Take the value of your property, get rid of all debts. Also, deduct any assets that transfer to charity upon death. Such transfers are deductions for your property. And then, if you are married and your spouse is a U.S. citizen, take any assets you inherit from him or her.

These assets qualify for the marital deduction and do not pay estate taxes until the surviving spouse dies. The net figures represent taxable assets. You can transfer up to the exemption amount after death without inheritance tax. That amount is $11.7 million in 2021.

Contact your estate planning representative for up-to-date information. Also, note that the amount you can gift during your lifetime tax-free is $1 million, so you are exempt from gift tax. If your taxable estate is equal to or less than the exemption available in the year of your death and you have not yet taken advantage of the lifetime gift exemption, you will not be charged federal estate taxes upon your death. However, if the taxable estate exceeds this amount, estate taxes will be assessed.

Transfers of other properties.

When you think about transferring assets, perhaps the first thing that comes to mind is large assets such as stocks, real estate, and business interests. However, you should also consider more basic assets.

• The contents of a safe deposit box look like this: In most states, banks seal the box as soon as they learn of a death, and open the box only in the presence of a personal estate agent.
• Savings Bonds: Surviving spouses can immediately cash in electronic bonds owned jointly. To cash H and E bonds registered in the name of the deceased but paid to the surviving spouse, they must be sent to the Federal Reserve. Benefits The surviving spouse or other beneficiary may be subject to any of the following subparagraphs:
• Social Security benefits include: To qualify as a surviving spouse, the deceased spouse must be over age 60 or the child must be under age 16. Disabled spouses can usually collect at an earlier age. Surviving children can also benefit.
• Employee benefits include: The deceased may have insurance, fringe benefits, unused vacation pay and retirement funds to which the surviving spouse or beneficiary is entitled. Specifics will be provided by the employer.
• The insurance they may not be aware of is as follows: Many organizations offer life insurance as part of their premiums. They should be able to provide the information.