You’ve Completed Your Estate Plan. Now What?
Signing off on your estate plan with your estate planning attorney is a great achievement, but there are other considerations to discuss, especially when it comes to implementing that plan. In order to fully utilize your estate plan, you’ll want to consider things like the tax ramifications on your surviving spouse and/or your beneficiaries, existing or complicated family dynamics, and more.
The Tax Impact of Your Estate Plan
When you or your spouse passes away, your surviving family members and/or beneficiaries may have tax burdens to consider with their inheritance. There are particular rules for inherited IRAs as it relates to non-spousal beneficiaries, for example. If a trust is involved in the inheritance, beneficiaries generally pay taxes on the distributions received from that trust.
Discussing the potential tax impact and tax bracket estimates with your financial advisor and tax professional before that event occurs can help you not only reduce the tax impact for your loved ones, but also ensure that more of your money stays within your family.
Improvement of Family Dynamics
The passing of a loved one is a difficult time for many, and when finances are involved, the situation has the potential to become even more complicated as emotions are heightened.
If you’ve listed beneficiaries that might not get along with each other, don’t have the best money management skills, or may not have the time or knowledge to handle your finances in the event of your injury or death, it’s critical that you consider the impact this may have on your family. Your successor trustee(s) and/or executor(s) will be responsible for filing taxes for the trust, making proper disbursements, and managing/investing assets held in trust. Sometimes it may be best to name just one individual, while other times it may be wise to name co-trustees. Lastly, one alternative that should be considered is whether a third party trustee may be best suited in difficult to handle situations.
Extenuating Family Circumstances
In the event that you have extenuating circumstances within your family (second marriages, special needs beneficiaries, etc.) discussing how the inheritance is distributed and to whom is crucial. Having these conversations ahead of time can help avoid stressful disputes and bitterness.
Do You Need to Update Your Estate Plan?
If it’s been a few years since you reviewed or created your plan, you may want to have an in-depth discussion to ensure everything is still aligned how you wish.
The financial professionals at Chatterton & Associates can create a detailed summary page of your investment accounts that you and your beneficiaries can review to verify nothing needs to be changed or added. Additionally, you should confirm that your accounts are up to date and titled properly - including your retirement and life insurance beneficiary forms - in order to avoid headaches for your beneficiaries down the line.
Implement Your Estate Plan with Chatterton & Associates
The wealth and tax professionals of Chatterton & Associates and the estate planning attorneys of James F. Roberts and Associates have been collaborating for more than 15 years and have decades of combined experience. Contact us to ensure that your estate plan is up to date and discover how you can implement your estate plan according to your wishes from a wealth, tax, and estate perspective.
