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Is Your Estate Arranged So Your Family Can Rest in Peace?

Why do you need an estate plan? When it comes to financial planning, many people overlook the critical aspect of planning for their estate when they pass away. Over half of Americans don’t have the basic documents that comprise an estate plan, including a will, living will or medical and financial power of attorney or directives.

The importance of an estate plan cannot be expressed enough. Do you want to leave your hard-earned money to chance or would you rather leave it to your loved ones? Establishing an estate plan specific to your individual circumstances will help streamline the settlement of your estate and ensure that your intentions come to fruition after your passing.

Important Estate Planning Documents to Draft and Keep Updates:


Your Will

Make sure that it includes language that protects you against potential change in estate tax exemption amounts. 

Living Will, Health Proxy and Durable Powers of Attorney for medical wishes 

Your family members will not be left guessing your wishes if you have clear instructions that are expressed in these documents. 

Durable Financial Power of Attorney 

For financial activities should you become incapacitated. 

Letter of Instructions 

An important document that addresses specific personal requests not in your will. It should be opened in the case of a severe illness or post-mortem. It can be used as a roadmap that shows the locations and the details of important documents and items from safe deposit boxes to checkbook  

Review all Beneficiary designation form on all of your trusts, retirement accounts and life insurance policies 

Many people feel that if they have a will, retirement accounts and life insurance policies will be distributed according to these documents.  Please be aware that the beneficiaries designated on your retirement accounts and life insurance policies will override everything – including your will, trust or any other estate plan.  Make sure that the beneficiaries are consistent in all cases.
 

Review titles on all non-retirement and non-life insurance assets.

Many people feel that if they have a will, retirement accounts and life insurance policies will be distributed according to these documents.  Please be aware that the beneficiaries designated on your retirement accounts and life insurance policies will override everything – including your will, trust or any other estate plan.  Make sure that the beneficiaries are consistent in all cases.

Estate Planning Tax Considerations

Estate Tax Exemption Amount: In 2017, the estate and gift tax exemption for individuals is $5.49 million This is up $40,000 from 2016. This means an individual can leave $5.49 million ($11 million for married couples) to their heirs and pay no federal estate or gift tax. Remember to check your state exemption amount as this is often different than the federal exemption.

Bypass Trust (AB trust): If you have more than $5.49 million of assets ($11 million for married couples), you may want to consider a Bypass Trust (AB Trust) to help reduce taxes by leaving some of your property to your children, but allowing your surviving spouse to use it during his/her lifetime.  You can make the portability election on a spouse’s death to preserve the exemption as well.  Remember to contact your estate planning attorney before deciding on a course of action.

Reduce Your Estate: There are several ways to reduce the assets from your estate to help reduce taxes. Besides spending and enjoying it, among these strategies are tax-free gifts, creating an Irrevocable Life Insurance Trust (ILIT) and creating charitable trusts. A knowledgeable financial advisor and estate planning attorney can help create the best plan for you based upon your individual situation.

Conclusion

One of the roles as your financial advisor is to help you formulate strategies in this critical area of estate planning that can protect your loved ones and simplify the estate settlement process during an already difficult time. Let us help!

This article is for informational purposes only.  This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice as individual situations will vary. For specific advice about your situation, please consult with a lawyer or financial professional. You should discuss any tax or legal matters with the appropriate professional.

© Academy of Preferred Financial Advisors, 2017

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