Tax laws are likely to change in 2013, and now is the time to take advantage of some of the most advantageous estate tax benefits you may see in your lifetime.
This assumes that you have a carefully conceived estate plan which allows you to decide how your assets should be handled when you die or become incapacitated. You’ve probably spent a great deal of time and energy accumulating your wealth, and a good estate plan protects your interests and those of your loved ones when you no longer can.
Under current law, Federal taxes can be as high as 35 percent on estates valued at more than $5.12 million. Failure to plan for the impact of such a tax could leave your family’s property vulnerable, and the larger your estate, the more critical it is to plan ahead. There are opportunities available to minimize the tax liability. As you think about your estate plan, consider these questions:Is it important for you to maintain control of all your assets during your lifetime?How much complexity and work are you willing to face in order to save on taxes?How willing are you to undertake aggressive estate tax strategies?
There are a number of ways to employ “gifting” and Trusts in the service of tax savings when planning ahead. Some are complicated and involved and should be considered in consultation with your estate planning professional and/or financial planner.
If you haven’t taken the time for estate planning, you’re not alone. Many people avoid what they see as an unpleasant task. But having a plan will ensure that your property is distributed according to your wishes and that any taxes, fees, and work involved in settling your estate is minimized. Taking time to develop a plan helps put you in charge of how financial and medical decisions are made if you become incapacitated or die. In addition to peace of mind, an estate plan can help you effect the following:
Ensure that your assets are distributed quickly with a minimum of legal wrangling.Provide support and stability for your surviving spouse, children, or grandchildren.Preserve assets for future generations (This is especially important if your estate is large enough to be subject to estate taxes, or if you have children from a previous marriage).Ensure that your wishes are carried out if you can no longer manage your affairs.Support a favorite charity with a gift of money, securities, or other property.Minimize the taxes and expenses that may be incurred in settling your estate.Provide sufficient cash to meet the estate’s expenses and avoid the forced sale of assets.Protect your privacy. A will becomes public record once your estate is settled. An estate plan can be designed to prevent an invasion of privacy.Set realistic expectations for your heirs, with the goal of avoiding confusion, resentment, and potential lawsuits.Make certain that your family business will pass intact to your heirs.
Answering a few fundamental questions can help you appreciate the importance of an estate plan and the ways in which it can help protect your assets and ensure your legacy.
-- Who inherits? How your money is handled after your death is, in many ways, as important as how you handle it now. No doubt you have specific ideas about the way you want your assets distributed. Through the use of a will or Trust in your estate plan, you can state your wishes in a legally binding way.
-- Who helps if you’re incapacitated? In the event you’re unable to manage your affairs, a durable power of attorney lets you name a representative to act in your place, allowing a trusted family member or friend to manage your finances, access your records, and pay your bills.
-- Who makes the tough personal health care decisions if you can’t? An “Advance Health Care Directive” allows you to give specific instructions about your own health care and provides the ability to name a trusted person to make health care decisions for you if you are unable to do so on your own.