What Happens When You Go To Paradise?

What happens to all your assets once you board a flight to Paradise?

Leaving this world without making final arrangements puts a horrible burden onto those you love!  It is difficult enough for them to say good-bye but give them the courtesy of knowing how you want things handled. You wouldn’t want to keep your wealth stored away forever, so it’s important to pass it on properly to the next generation.

There are some essential things you will want to know when you are making your final arrangements.

Understanding Taxes Imposed on Estates

An estate is assessed tax, not the beneficiaries of the estate.  Estate and gift tax planning is an area of tax planning that, if ignored or done improperly, could have a substantial huge negative impact on the amount of money that is actually passed down to your heirs. 

Besides the actual properties such as buildings or houses, an estate includes all the assets that a person has at the time of death.  An estate could be subject to both estate and inheritance tax.  Inheritance tax is assessed by the state and will vary from state to state, while the estate tax is a federal tax.  Every estate that has a net worth exceeding the amount set by the Internal Revenue Code is subject to federal tax. 

It helps if you have a clear idea of how much you can transfer to qualify for an exemption. It’s often best to find a qualified estate planning professional who can help you develop an effective estate planning strategy.

Best Practices in Estate Planning

For tax planning purposes, people frequently will try to reduce the amount of their estate by gifting funds to their beneficiaries.  If these gifts do not exceed $15,000 per year (this amount is frequently revised by the government), they are not subject to a gift tax. If a gift exceeds $15,000 annually, the giver can elect to either pay the gift tax on the excess or apply the excess to the lifetime credit.  Couples can transfer a total of $30,000 combined to a single recipient each year since each spouse can give a gift. 

Note that the giver of these monies pays or has paid income tax on these funds, and the receiver does not. If you can safely anticipate that your estate will not exceed the estate tax exemption, then gift tax exclusions are likely irrelevant to your circumstances. 

It is imperative that you seek qualified estate planning professionals who can address your personal situation for proper estate tax planning.  With that in mind, here are some basic considerations as you are getting started:

• Take an inventory of all your assets and their value and determine their current form of ownership.  Discuss with your professional the effect of transferring this property at death.

• Confirm the amount of and the beneficiary designations on all life insurance policies. Make any necessary changes after examining what provisions should be made for each situation.

• Determine the value of your estate to establish if estate tax planning is warranted.

• Clarify how health care will be funded, and financial and health care decisions will be made in the event of your inability to handle these affairs.

Consider authorizing a power of attorney in event of this situation.

• Select a guardian to care for minor children.  Look into trust-type estate plans.

• Consider closely held family-owned businesses and farms in your estate planning.  You may need to consider Buy-Sell agreements with proper insurance coverage to fund the necessary transactions to settle your estate.

• Educate yourself on the disadvantages of joint tenancies and how they will impact your personal estate situation.

• Design your action strategy to implement your estate plan.

• Be sure to include a will in your estate planning; it is essential.

Estate planning may seem a bit too tedious but if you want to leave a lasting legacy to the next generation, you have to make sure that they won’t have trouble accessing your assets.  

Proper estate planning is a wonderful way to show your loved ones how much you truly care.  You will save your beneficiaries a tremendous amount of heartache as well as a significant amount of tax at an already difficult time.

With the right strategy, you can give your wealth more room to grow decades after you passed on.                            

Contact Business Untangled to be connected to our associates, who are some of the best in the Estate and Tax Planning industry.  Call us today so you can get started right away!