Articles Posted in Estate Planning

It’s often heartbreaking when an individual’s spouse dies and, on top of trying to arrange their spouse’s funeral while grieving, they also have to struggle through accessing the family’s financial records and accounts without knowing where to begin.

It’s difficult to have conversations about estate planning and death. However, having conversations to plan for each person’s death will make the life of the surviving spouse far easier when the time comes.

Since there is no way to know which spouse will die first, it’s important that both partners are involved in or are at least provided with information for the family’s finances.

You may choose to include a living trust as part of your estate plan for a number of reasons – such as avoiding probate, passing assets to beneficiaries in a more hassle-free way, etc. There are some common myths about living trusts that you may want to know so that you can be sure you aren’t trying to use a living trust to do something it cannot do. Here are a few of those misconceptions:

Misconception #1: A living trust will help you avoid estate taxes.

If you have a large enough estate to need to worry about estate taxes, there are a number of strategies you can use to reduce the size of your estate. However, a living trust is not one of them.

Not only can gifting assets to your grandchildren help them get a better start in life financially, but it can also help you by reducing the size of your estate and the tax due after you pass away.

An outright gift to each grandchild may be the simplest way to do this, and you can give them up to $16,000 a year (in 2022) before having to report your gifts. Also, if you are married, you and your spouse can both give gifts of up to this amount (bringing it up to $32,000 that could be given to each grandchild) without gift tax implications. These gifts also do not count as taxable income, although earnings will be taxed if these gifts are invested. However, keep in mind that gifts can have an effect on Medicaid eligibility.

You may be hesitant to give outright gifts to your grandchildren, especially if you wish for this money to be used in certain ways. If that’s the case, here are some options to consider:

If you are one of an increasing number of people with cryptocurrencies or noncurrency blockchain tokens, you’ll want to make sure to include these assets in your estate plan so that your heirs know about them and are able to access them. Crypto assets have unique qualities that need to be taken into consideration for estate planning.

First, you’ll need to make sure your heirs know that these assets exist and where they are kept, whether in a cold storage device (such as a USB drive) or in hot storage (such as in an online digital wallet). They typically have no account statements, and your heirs may not be aware that you have crypto assets unless you include them in your estate planning documents.

Next is the challenge of how these assets are transferred. Crypto assets are accessed using a private key which may be 64 digits long and is used to sign transactions by one’s digital wallet. This private key is all your heirs need to access your crypto assets, and these heirs may not need to be appointed executor of your estate to take control of these accounts. If your heirs or fiduciary aren’t left with the private key, though, it’s likely those funds would be forever lost.

Although people typically want the inheritance a loved one leaves behind for them, there are some situations where an inheritance may be unwanted. In these cases, you need to disclaim the inheritance.

Instead of feeling honored by an inheritance, some people may feel burdened by it for reasons such as:

·        Taxes. If the inheritance brings your estate above the estate tax exemption amount, under current federal rules, your estate would be taxed at 40 percent after you pass away.

There may be specific items that you leave for certain family members and loved ones in your will, including some of your most prized items and collectibles. Those possessions that are left over can be covered by a standard “residuary clause” in your will.

A residuary clause is a provision in a will to pass the residue of your estate to designated beneficiaries. This covers all of your stuff that you don’t list as specific gifts. You may decide to leave the residue of your estate to your spouse, or you may divide it evenly among your children if your spouse predeceases you. Often, a residuary clause included in one’s will determines how a large part of their estate is distributed.

A residuary clause ensures that all of your possessions that aren’t specifically addressed in your estate, including both known and unknown assets, will pass according to your wishes. Without a residuary clause, you may forget a valuable asset, or the designated recipient of a gift may die before you, and these items would pass under intestacy laws of the applicable jurisdiction.

The start of a new year is a great time to revisit your estate plan, reflecting on things that may have changed since you last looked at these documents. As we begin the second month of 2022, here are some questions to consider for your estate plan:

Do you have a will, healthcare directive, and power of attorney in place?

If not, when could you set aside time for each of these?

Have you moved from one state or another, or are you currently planning to move to a new state? People change states for a variety of reasons such as a new job, a more pleasant climate, or to live closer to other family members. There are always some hassles you’ll have to deal with when you move to a new state, including finding new medical providers and updating your driver’s license and other documents.

As part of the planning for this type of move, don’t forget to amend your will and other documents that are part of your estate plan. Although it may not be the most urgent matter to address first, be sure not to put it off as the last thing you do (and especially make sure to not delay it indefinitely).

Don’t forget that the laws governing wills and most estate planning documents vary from state to state. Your will remains generally valid, but it’s important to revisit it and see what laws are different in your new state as well as what may have changed for you personally with your new situation. In extreme cases, it is possible for some estate planning documents to be called into question.

We often think of financial planning as a set of distinct practices – including those such as estate planning, investment planning, retirement planning, etc.

But what events typically lead you to reach out to a financial advisor (or, if you are an advisor, when do your clients reach out to you)? A job or career change, marriage, the birth of a child, death, divorce, disability, or other huge life changes. Not many people seek out an advisor because they simply woke up one morning and realized that their asset allocation could be better.

It’s almost always life that leads to any interest in financial planning. Maybe a better way to think of the purpose of financial planning is this: