Being prepared for the unexpected is always a good idea, especially when so much could be at stake. Putting off creating or updating your estate-planning documents is not a good idea because it could mean giving your beneficiaries far less money. Ensuring that you have the necessary estate plans at the end of the year will comfort you and your family members.
If you find it hard to choose which people should get your assets, a guardian for your young children, or an executor for your estate or trust, remember that you can change the names later. It is better to go through the process and have something in writing than to leave it undone. Without estate-planning documents, the state will determine who gets the assets, and a large portion of your estate will go to taxes.
Review Existing Documents With an Estate-Planning Attorney
Tax laws and estate-planning methods are always changing—and so is life. Review your existing documents with a lawyer to determine if they are still what you want and need for the best asset protection from taxes.Check Your Beneficiaries
Do you still want your named beneficiaries to receive the assets and money you planned on giving them earlier? Since they have grown older and have different needs do you need to update any of your plans for them? Have there been new births in the family or deaths that you need to consider? Have you gone through a divorce or the death of a spouse?Do you have beneficiaries named for your assets that will not go through probate? They would include:
- life insurance policies
- retirement accounts, e.g., 401(k)s and IRAs
- pensions
- annuities
Identify All Your Possessions
An effective estate plan needs to include all of your assets. After you have the list, name a beneficiary you want to have that item.Most likely, you have purchased some new assets since creating your estate plan, and some you no longer possess. Add new property, vehicles, business assets, digital assets, stocks, bonds, items in a safe deposit box, bank accounts, art, jewelry, collections, etc., to your estate-planning documents.
Assets not listed in a will or trust will likely go through probate, depending on the estate’s size. CNBC mentions that if you list one beneficiary in a will, but another name appears on assets that do not go through probate, the named beneficiary on the account will stand.
It is imperative that the names on all your accounts correctly express your intentions. Imagine the heartache caused by forgetting to change the beneficiary on your retirement accounts to your new spouse!
Power of Attorney Documents
Being prepared must include the possible event you may become unable to make decisions for yourself. It requires signing power of attorney documents (with witnesses) for medical, legal, or financial decisions. The documents may vary slightly in various states but they are generally honored in other states.- Durable power of attorney—Giving someone this authority can be used whether you are in good health or not. Investopedia says power of attorney can be used if you are away for some time or for a particular event, such as signing a contract in the owner’s absence. When it is durable, the authority continues after the individual becomes incapacitated; otherwise, it ends at that time.
- Medical power of attorney—This document authorizes a named individual to make medical decisions for you. They can decide your treatment, medications, whether or not you receive life-prolonging interventions and more. Be sure to name an alternate agent, too. The document can be generalized or specific—including your preferences and personal values.
- Financial power of attorney—This document authorizes someone to handle financial matters when you become incapacitated. You can specify certain parts of your finances or all of them.
Financial Gifts
If possible, estimate your taxes for the year and see if your income will put you in a higher income bracket. You can give gifts to charitable organizations or contribute to retirement accounts to reduce your taxes. Making personal gifts of up to $17,000 per person will help to reduce your estate for estate tax purposes.The Assets in the Trust
After creating a trust, you must transfer your assets to it for it to be effective. The assets must have titles declaring they are trust property and not of the trust creator. Otherwise, they are not protected from taxes. Regions mentions that when an asset is listed as having joint ownership with the right of survivorship, then that asset passes to the surviving owner. The estate plans, however, need to reflect the same thing.Depending on how the trust was set up, you may want to change the amount of assets going to specific individuals. If a trust is set up to match the estate tax exemption and the balance to go to the surviving spouse, Regions says, the spouse may end up with nothing because the exemption amount is very high right now—$12.92 million in 2023 and $25.84 million for couples. In 2026, it will be half that figure.
Designate a Guardian for Minor Children
If you have minor children at home, EstatePlanning says you need to designate a legal guardian for them—and an alternate. Also, make sure to have funds in a trust for their care if you should no longer be around to provide for them.The Location of All Your Important Documents
Before the end of the year, ensure that all of your important documents are in one place and that your beneficiaries know how to access them. Along with financial documents, include your birth certificate, marriage certificate, and other ID documents.Reviewing your estate plans at the end of the year with a trust and estate attorney is a good idea. Update yours regularly to ensure a smooth transition of assets with as few problems and taxes as possible.
The Epoch Times Copyright © 2023 The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
