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Back to Basics – Estate Planning Part II


View the previous post in this series - Back to Basics - Estate Planning Part I

Recently we discussed two reasons most families will benefit from estate planning. This post continues with two more ways an estate plan can help carry out your goals for your family.

With the federal estate tax exemption amount now set at $5.25 million for 2013 and $5.34 million for 2014, and increasing annually with inflation, it may seem like estate planning is no longer important. While it is true that most estates will escape this tax, (the estate tax will affect less than 0.2% of decedents over the next decade) there remain many critical issues that most families want to address in an estate plan once they become aware of them. These issues do not depend on your age or level of wealth, but they will make your survivors wish you had bothered to prepare a written estate plan!

If you have no will or trust, you still have an estate plan – it is the set of default rules that will impact your estate after your death. If you desire to change any of the default results, then you need a written estate plan. The issues that seem to matter most to the majority of our estate planning clients include:

1. Children Receiving Inheritance at Young Age. With no estate plan in place, your heirs will receive their inheritance at age 18. Most young adults of this age are not ready to manage substantial sums of money, and a poor decision or two can mean there is insufficient money for college costs or other critical needs. Also, in some estates on the first spouse’s death, minor children’s inheritances are placed in custodianship accounts for distribution to the child at age 18, but this money is not available to the surviving spouse to use for the family’s basic needs until then. A Living Trust can set up parameters for your successor trustee to follow when making distributions to children for education and other needs. The money can be held back in trust for as long as you believe will be necessary.

2. Special Needs Beneficiary. If any of your heirs are disabled, whether children or adults, and even possibly your spouse, it is probable that their receipt of an inheritance would disqualify them from receiving government aid. Use of a Special Needs Trust would allow the inheritance money to be spent for items government aid does not cover, enhancing your family member’s quality of life, and would (in most cases) allow the amount remaining after their death to be paid to other family members.

These issues are not all-inclusive of the reasons your family may greatly benefit from a written estate plan. If you are in a financial situation that puts your estate at risk of paying estate tax, that issue must be carefully addressed to take full advantage of two exemptions for a married couple, and can incorporate other estate tax saving measures. Whether you have an old estate plan that should be reviewed, or whether you are starting from scratch, we would be happy to discuss your needs and propose an estate plan that will accomplish your goals.

For more information, feel free to contact Patricia Kraft, Timothy Murtaugh or John Egan.

Categories Estate Planning Legal Updates

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