Estate Planners tell their stories to set up a successful Estate Plan

Estate planning isn’t a space science. All it takes is managing your estate so that your beneficiary can receive the maximum benefit from it.

Many middle-class Americans assume that estate planning is only for the rich. If you own anything; a car, a house, an insurance policy, or a bank balance, then you qualify for estate planning.

Let’s put it this way; your estate will go through the legal process of probate before being assigned to the correct beneficiary. Without a proper estate plan, your property is open for the contest from families or friends and a heavy estate tax.

If you wish to avoid significant legal hassles and contests over your property, you should seek an estate planning attorney to help to plan your estate successfully.

Here, we have compiled information about proper estate planning after talking with various estate planning attorneys. These are the things you should know before undertaking an estate plan.

Are Will and Estate Plan different?

Don’t confuse estate plan for a will. While the will contains directives about distributing your wealth and appointment of a guardian, the estate plan contains an arrangement of distribution of assets in a way that provides maximum benefits.

Let’s say that a will is a document while an estate plan is a wealth management tool.

Unlike the Will, Estate planning considers the provision of your will and how your wealth will be distributed, taxed, and protected. It highlights the preparation of tasks that manage an individual’s asset base in the two events, incapacitation or death.

Estate planning also envisages ways to reduce estate tax and prevent probate by establishing trust and insurance policies. Hence, it is a more helpful tool for every person.

What does estate planning include?

• Will/trust
• A durable power of attorney
• Beneficiary designations
• Letter of intent
• Healthcare power of attorney
• Guardianship designations
• Life insurances

Tip for successful estate planning

Here are some handy tips from estate planning attorneys to creating an estate plan like a pro.

Assemble a team

It takes a team of experts to determine your estate plan. A team you would need will include a financial advisor, tax professional, and estate planning attorney. They will help you map out a complete plan that’s customized for your need.

You may ask why do you need a financial advisor. Well, each person plays a critical role. A financial advisor can advise you about your current financial state, break down your estates and other compliances.

A tax attorney and estate plan attorney will help you plan out estate taxes, probate, and the preparation of documents.

Document your wishes

You’d need to document everything to help out with legal hassles, including the probate process, executing a will, and distributing the wealth.

Your estate plan should clearly state what you want to do with assets upon your death or incapacitation.

Make sure your estate plan includes the following:

• Healthcare power of attorney or proxy: It assigns the person you want to make health decisions for you if you are incapacitated.
• Durable financial power of attorney: Determines the person who will make financial decisions if you are incapacitated.
• A living will: It provides clear instructions about what treatments you do and do not want if you cannot speak for yourself.
• Health Insurance Portability and Accountability Act (HIPAA) Release form: It allows named individuals to access healthcare information.
• Last will: A will designates beneficiaries for your property and choose guardians for minor children.

Set up guardianships for dependents

When creating a will or estate plan, you’d need to name a guardian to look after any dependents.

Minors or people with special needs will require a guardian to look after their economic and medical needs.

Make sure you have talked to and chosen a suitable guardian ahead of time. Guardian and conservator will have legal duties to look after the estate and medical needs.

Talk to your estate-planning attorney in Des Moines about how to prepare for this circumstance.

Consider trusts

Establishing a trust helps to mitigate some or all of the estate taxes. It allows you to transfer the legal title of your property to another person, potentially saving thousands of dollars in the court process and taxes.

A trust gives the trustee the authority to distribute assets immediately to the beneficiaries, hence avoiding court involvement and probate process.

Trust can be distinguished into revocable trust (a living trust that can be changed) and irrevocable trust.

Avoid or minimize federal/state estate taxes.

You may ask why avoid an estate tax? Well, because it can take away a significant chunk of your estate.

It may come as a surprise, but avoiding federal estate tax isn’t illegal. You aren’t avoiding paying tax but simply minimizing the estate tax rate.

Estate Tax, also known as federal estate tax or death tax, is levied on the estate worth over $5.3 million.

Many people claim that they aren’t that rich, so they need not pay 40% tax, but it isn’t true. You’re still liable to pay federal tax above $5 million worth of estate and state levied taxes which can take away a large portion of your estate.

Here are three proven ways to avoid estate taxes.

Give gifts

Offer a portion of your wealth as a gift to your family members. Throughout your lifetime, you can give out up to $11.4 million of your wealth as gifts before getting hit with the gift tax.

There’s no limit to the number of people you can gift within a single year, so you can gradually pass on your assets to your loved ones.

Establish an Irrevocable Life Insurance

To prevent your insurance from being taxed, you can consider creating irrevocable life insurance trusts. Irrevocable means that the trust cannot be revoked after their creation. Move your selected properties into the trust.

Make donations

Making a charitable donation in your lifetime can help to reduce Inheritance Tax. The amount of donation you make in your will is counted towards your estate’s total taxable value.

Avoid probate

When a person dies, their estate is passed through probate before being handed to the proper beneficiaries. The probate estates may include bank accounts, investments, homes, other real estate, vehicles, etc.

Avoiding probate is not illegal until you do it the right way.

1. Use a revocable living trust in which the assets are passed to the trust beneficiaries by operation of the trust document.
2. Obtain life insurance that passes outside of probate to the beneficiary.
3. Retirement accounts can also pass to the beneficiary without the probate process.
4. Consider assets with joint tenants. When the property has two owners, and the first owner passes away, the second one automatically owns the property.

Prepare for long-term care.

Suppose you require long-term medical care that cuts into the assets that you have assigned initially for your heir. A financial advisor can help prepare for this by preserving your assets and ensuring that your estate contains enough assets to pass to the beneficiary.

Talk to your financial advisor and estate planning attorney to discuss your options.

Know about income in respect of a decedent (IRD)

The federal or state estate tax is not the only tax you need to be aware of when drafting an estate plan. A little-known tax that hits people who inherit certain types of money is called Income in Respect of a Decedent, or IRD.

Suppose after your death you have left income that hasn’t been taxed, your estate or your beneficiaries will have to pay income taxes on that money. This type of income includes bond income, individual retirement account payouts, sales commission, etc.

A tax professional will ensure that your estate plan includes tax scenarios.

Don’t forget about digital assets.

Your digital assets include treasures, photos, videos, and essential documents, including digitized formal documents, social media accounts, digital file storage, etc.

The one way to ensure that all of your digital assets are accessible to the beneficiary is by designating a “digital fiduciary” in your estate plan. The person assigned as a digital fiduciary will have the right to access digital information.

Start planning your estate today so you can prepare to transfer your wealth to your loved one without any difficulties.

Mark Gray Law PLC is a premier law firm in Des Moines. Our in-house legal attorneys specialize in everything related to estate planning, establishing trust and will, guardianship and conservatorship, etc. You can depend on our experienced estate planning attorneys to help solve your legal difficulties.