According to Skeeles and Cunningham from the Ohio State University Extension, estate planning ensures that the welfare of a loved one is secured even after his or her death. However, the majority of Americans do not have a plan or a will. Why? No one likes to think or talk about his or her own demise, and our loved ones don’t want to hear about this subject either. Another reason is that the majority of us do not fathom the idea of planning an estate.
How Important Planning Your Estate Actually Is
Apart from securing the future of your loved ones, estate planning will help you safeguard your assets and guarantee that it will be apportioned according to what you desire. Without an estate plan, the state will decide who will have your assets and how much a person or persons will receive at the time of your death.
By planning your estate, you can minimize the estate taxes that the government will impose. More so, in the event that you become incapable of making decisions, you can choose the person who will carry out those decisions on your behalf.
Estate Plans You Should Regard and Accomplish
Financially Securing Your Dependents
Life insurance is a valuable benefit. According to Skeeles and Cunningham, it can be used to pay the cost of settling the estate or used to provide liquidity for agreements that involve buying and selling.
There are various types of life insurance available. Before looking into them, know your goals first so you will receive the best outcome.
Planning for Your Retirement
Estate planning and retirement planning must not be considered separately. It is either you live rich and die poor, or you live poor and die rich.
For those without dependents or a business to take into consideration, the idea of the best estate plan is to have nothing when they die. However, the majority of us choose to accumulate even a tiny bit of wealth before our demise.
Distribute Equitably, Not Equally
Equal distribution is natural in estate planning. But in some cases, the right thing to do is allocate the inheritance to dependents or heirs based on their needs.
Liquidating the Assets of the Estate
Settling an estate can be costly. Life insurance policiesand savings accounts can be liquidated and used to cover expenses and taxes due.
Documents Associated with Estate Planning
An online site that offers legal solutions identified the documents needed in planning your estate. These include a living trust, a last will and testament, a living will, and a power of attorney for finances.
A living trust is set up to determine who will inherit your properties before you die. The assets will not undergo a probate, or the process that will manage, settle, and distribute your properties in accordance with your desires or the law. Rather, the properties will be given directly to the beneficiaries.
Last Will and Testament
A last will and testament is similar toa living trust. It is here that the guardians of your minor children are identified.
Living Will and Healthcare Power of Attorney
These documents will allow people to know in advance your healthcare decision plans. An example is the use of life support.
Power of Attorney for Finances
With the power of attorney for finances, you have the authority to choose who will carry out your financial and other non-medical decisions.
Federal Transfer Taxes That May Have an Impact on Your Estate
Federal Estate Tax
At the time of your death, a federal estate tax may be levied on the value of your estate that is subjected to tax. However, according to an investment management company, you can transfer an exemption amount of assets equivalent to $5.43 million per US descendant. The amount is free from federal tax.
Federal Gift Tax
The amount of an exclusion gift per year is $14,000 per individual, and $28,000 for couples who are married. You can transfer up to the limit to anyone without being liable for a gift tax.
Generation-Skipping Transfer Tax (GST)
The GST applies when you transfer your properties to someone who is two or more generations from you.
The rates of the inheritance tax vary and will depend on the amount of assets inherited by the beneficiaries and their relationship to you.