Plan For Your Future With Confidence And Clarity
What is estate planning and who needs one? Estate planning is a way for an individual to ensure that when he or she passes away, all of the assets go to the organizations you want to give your assets to and/or individuals you want to leave your assets with. It also includes mechanisms to dictate important decisions to medical providers regarding health related issues in the unlikely event one becomes incapacitated for any reason.
Anyone can create some form of an estate plan regardless of how wealthy a person may be. Estate plans are deeply personal matters and your reasons for wanting to consider one will likely vary from one person to the next.
For some people, a simple will can accomplish all of their estate planning goals while other individuals may need a more in-depth estate plan like a trust. You may want to preserve money for your children or you may not want to be put on life support should you get into an accident. These are just some of the issues you can address in an estate plan.
Before starting an estate plan, you should consider what assets you have and what your goals are for them. Perhaps a family member has a disability and they will require 24/7 care for their entire life and you want to ensure that it will be paid for. Or, maybe, you want to give a family heirloom like a diamond ring to a certain relative. Your goals will dictate how an attorney approaches your estate plan in a way that meets all your needs.
Another important thing you will want to consider when creating an estate plan is how federal and state taxes will affect the administration of your estate. There are three different types of federal taxes than may come into play when creating an estate plan – estate tax, gift tax, and a generation-skipping transfer tax (GST). You will want to be aware of these taxes because they may have a significant impact on how much money you will leave behind.
Estate taxes are imposed on the taxable value of your entire estate at the time of your death. There are different mechanisms to avoid paying estate taxes and can be done so up to a certain limit. Gift taxes are imposed upon gifts given in a person’s lifetime that exceed the exemption amount. Again, there are ways assets can be transferred to avoid paying these taxes.
A generational skipping transfer tax, or GST, is a tax on gifts given to someone who is two or more generations from you. GST taxes can be in addition to estate and gift taxes and are taxed at the highest level (40%). GST taxes can occur when a grandparent gives a gift of value to a grandchild, thus skipping the grandparent’s child or when a grandparent sets up a trust for a grandchild. Like the gift tax, GST taxes may be subject to certain exemptions.
An experienced attorney will help you navigate the confusing world of federal taxes when creating an estate plan.