Everyone I know is ready to tackle 2019. How many people have completed their estate plan based on their 2019 goals? Many people have excused themselves from completing this task because they reason that it is unnecessary since they do not have taxable estate. Now, while I agree that most people will be able to utilize the federal estate tax exemption and protect their inherit estate for their heirs from the tax it’s still wise to have a plan in place. With a federal estate tax exemption in 2019 is $11,400,000 (increased from $11,180,000 in 2018), avoiding estate tax is no longer a goal for most Americans.
The IRS states, “most relatively simple estates (cash, publicly traded securities, small amounts of other easily valued assets, and no special deductions or elections, or jointly held property) do not require the filing of an estate tax return.“ However, a carefully constructed estate planning can help you achieve the following goals:
- It allows you to choose who you want to receive what, how much and when
- It allows you to direct ownership of your assets, rather than letting the courts send your assets to outside parties like creditors
- It allows you to make charitable gifts upon your death if that is an important goal for you.
When people ask me, “why do I need an Estate Plan?” I ask them these four questions.
- Do you own real estate?
- Do you or will you have assets in excess of $100,000?
- Will you have debts and liabilities at the time of your death?
- Do you have minor children or any special needs dependents?
If they answer yes to any of these questions, then I advise they need an estate plan. Creating an estate plan is no easy task. The two most difficult things the client must do are as follows;
- Select a fiduciary
- A fiduciary is a person or entity who’s job it is to carry out the intentions of your estate plan. Sometimes, single persons choose one or both of their parents. Sometimes, a single person’s parents are divorced and that person has a difficult time choosing between the two parents, and knows that making them work together is an impossible task. Sometimes, a single person’s parent or parents are deceased, so they choose another relative (sibling, aunt/uncle, cousin, etc.) Sometimes, they choose a friend or a trusted professional advisor. Married persons do not have it easier simply because they are married. Yes, married persons certainly choose their surviving spouse, more often than not, but a good estate plan provides for the death of both spouses. So, what then? Should the children become the fiduciary. Depending on their age, this may or may not be a wise decision. At the end of the day, anyone that creates an estate planning document must choose for themselves what person and what successors will be in control of their assets upon their death.
- Determine what you want your estate to accomplish
- It is the client’s responsibility to set goals and plans: avoid probate or not, give outright gifts in a lump sum or partitioned out over time, give charitable gifts, etc.
Once the hard decisions are made a good estate planning team can help you reach your goals. Whether they are: wealth protection and risk management to insure income for your dependents (that’s where your financial planner and investment broker come in), income tax efficiencies for heirs (that’s where your CPA plays an important role), and the orderly transfer of assets upon your disability and death (that is the role of estate attorney). If creating an estate plan is on your 2019 task list, know that you don’t have to undergo this task alone. I would be happy to meet with you and help you get started. Contact Sparks Law office, P.C. at (618) 210-7835.