A Broad Plan Should Be Part of Your New Year’s Resolution
With the New Year, it is always a good idea to review your estate plan and consider three important objectives:
- Do my estate planning documents avoid probate upon my demise? When someone signs a revocable trust but does not take the next step to fund their Trust, assets that continue to be owned in an individual name may be subject to probate. If you have a revocable trust, carefully review how your assets are titled. If you don’t have a revocable trust, probate may still be avoided by using survivorship or beneficiary designations. Those having smaller estates frequently use beneficiary designations for financial accounts and Lady Bird Deeds (life estate deeds) for a Florida residence to avoid needless probate.
- Do my estate planning documents protect my children and my grandchildren in the event of my demise? When parents pass away, their estate should pass to their children and their grandchildren in further trust. In most cases, the children (or other beneficiaries) should be the trustee of their share. This gives the children the flexibility to use trust assets during their lifetime while protecting them in the event of divorce, creditors and even bankruptcy. These trusts for the benefit of children may pass estate tax-free to your grandchildren, thereby ensuring that family assets remain within the family line rather than passing to a surviving son-in-law or daughter-in-law. Co-trustees, if necessary, can ensure that the children (or other beneficiaries) use and invest trust assets wisely. Leaving your assets to your children in the trust will give them a lifetime of protection without sacrificing flexibility; it is indeed one of the most frequently overlooked planning opportunities.
- Does my estate incorporate liquid assets that could be used to pay potential estate taxes upon my demise? While the estate tax exemption has increased, many portfolios have also increased. Care should be taken to determine if your estate is taxable and if your estate has sufficient liquid assets to pay those taxes. Life insurance remains a good planning option for liquidity to pay estate taxes. As a planning vehicle, life insurance provides your children with a tax-free income and money to pay estate taxes. Be aware that life insurance owned in your name will be part of your taxable estate. Life insurance owned by your children will avoid estate taxes but will be subject to potential marital and creditor claims. To avoid unintended consequences, you should consult with your advisor about whether an insurance trust (ILIT) should be part of your estate plan.
Questions or Concerns? Make a New Year’s Resolution to call us for a confidential consultation with our expert advisors at 561.689.1000 ext. 103 who can guide you through this complex area of estate planning.
