Safeguarding your assets and passing your property to your family and other beneficiaries after you die is an important goal that is not restricted to the wealthy. Estate planning can help assure that your legacy goes to your heirs as you intended and that complications and legal battles are avoided.
More than a will
Wills are part of an estate plan but are not the plan itself. In many cases, these documents may be ineffective if additional measures do not address your unique situation.
Complex family relationships are the reason for creating an estate plan and not for avoiding it. Family turmoil can complicate the passing on of your estate without a solid plan.
Life contains many major changes such as marriage, divorce, family members moving away, career changes and even receiving inheritances. Major life changes typically require updates to estate plans and documents.
Beneficiaries may need changed, even if your will is current, to assure that a former spouse, for example, does not receive insurance or retirement funds. Decisions must be made on whether beneficiaries should receive assets over time or at once. You may want to reconsider and change the person who will make financial or medical decisions on your behalf through a power of attorney.
Taxes and finances
Assets such as individual retirement accounts, Roth IRAs, brokerage accounts, insurance policies and bank accounts are taxed differently. It is important to consider which heirs or beneficiaries can pay the taxes if they receive these assets.
Their financial situation may also play a role in which assets they receive. If there is a substantial difference in their financial holdings, it may not make sense to divide assets equally. A child who earns more and is in a higher tax bracket should receive a Roth IRA, for example, even if it contains lower assets than other funds because its proceeds are tax free. The lower earner in that situation should receive the traditional IRA which is taxable.
If you wish to engage in philanthropy, qualified accounts may be left to charitable organizations. Tax-exempt charities do not have to pay taxes on these distributions.
An estate plan outlives you and has multi-generational impact. An attorney can help provide you options that further your goals and prepare the appropriate documents.