End-of-life planning is often a sensitive topic to talk about with our closest family and loved ones, but it is also a necessary topic to discuss to set families at ease and to avoid unnecessary stress and legal hurdles.
Estate planning meetings usually involve adult children with their elderly parents, but these conversations are for those of every age, as you can never know when you’ll need a well-planned estate.
As you start estate planning with a loved one closest to you, here are 3 important recommendations:
1. Emphasize the ultimate benefit: peace of mind
Estate planning makes it possible for the transfer of property to take place seamlessly while minimizing estate tax liability of assets after one has passed away. One of the key benefits of this process is that it brings peace of mind to you and your loved ones.
Your family member can feel confident that their loved ones (or designated organizations) will receive their property according to their wishes – with as little hassle and extra cost as possible – with a well-planned estate. Individuals may also find comfort in writing down their wishes for end-of-life arrangements. Many people have a good idea of what they want their funeral to look like, but unless it is put in writing, family or friends may not know how to plan the service one hoped for.
2. Be as open as possible
As much as possible, it is best to enter an estate planning conversation with an open mind. It’s important to be honest, to listen closely, to ask good questions, and to communicate openly and clearly about your loved one’s wishes for their end-of-life arrangements and distribution of wealth.
People often make a lot of assumptions regarding end-of-life financial planning. One common assumption that parents often have is that their children will have no problems dividing their assets after they have passed, which can lead to fighting and end up putting a lot of stress on surviving siblings. It’s best to communicate clearly how your assets should be divided.
It’s also critical to choose trustees and executors carefully and to name one who is organized and thorough. Make sure that the person chosen for this role is informed of where all of your loved one’s assets are, as it can be extremely challenging for an executor to be in charge of handling an estate without knowing where to begin.
3. Pay careful attention to beneficiary selection
When assigning beneficiaries, it’s important to carefully consider the tax implications while discussing estate planning with your family member. People often name a trust as the beneficiary of an IRA account when their children are young. However, when an IRA is distributed to a trust, it hits the income tax trigger and those assets will be taxed immediately. If children are instead named directly as beneficiaries, they have other options independent of one another that can provide substantial tax savings.
Individual accounts can also have “transfer on death” designations, similar to beneficiary designations for a retirement account. This allows someone to name a beneficiary when they pass and prevents these assets from going through probate.
Reviewing beneficiary designations once a year can prevent unnecessary complications and help ensure that assets will be transfered according to one’s wishes.
The best time to discuss estate planning with those you love is, truly, now, when it is on your mind. A financial adviser can help you navigate the process and determine which strategies will provide the best outcomes for you and your family.
For assistance creating or updating your estate plan, contact us at Wilson and Wilson Estate Planning and Elder Law, LLC at 708 482 7090 for our main office in LaGrange, Illinois or at 847 656 8958 for our Northbrook, Illinois office.