The Importance of Estate Planning
Until January 1, 2013 (when the estate tax exemption is scheduled to decrease to $1 million per taxpayer), the estate tax exemption rate is $5 million per taxpayer. Accordingly, if the value of your assets (including life insurance death benefits) is less than $5 million, then no estate tax will apply to transfers to beneficiaries at death.
Even though the current $5 million exemption amount may allow many taxpayers to avoid estate tax, one must still consider many other issues presented by individual and family circumstances as reasons to develop and implement an estate plan.
As demonstrated by our National Estate Planning Awareness Week articles on the estates of Jimi Hendrix, Anna Nicole Smith and Leona Helmsley – devastating and costly non-tax related problems can result from outdated (or non-existent) estate plans. The following list includes commonly overlooked issues which, if not addressed, can cause distressing outcomes:
• Name a person (and an alternate) to handle your affairs in case of incapacity
• Name a guardian (and an alternate) for your minor children
• Provide for a trustee to manage assets for your spouse or children, or both
• Protect assets for your special needs child
• Prevent disputes between your current spouse and children from a prior
• Keep assets out of the control of in-laws
• Ensure that your estate has liquidity
• Update/revise your IRA or 401(k) plan beneficiary designations
• Protect the value of your business/practice for heirs
• Control the timing and manner in which your estate passes to intended
If one or more of these issues applies to you or a loved one, don’t wait for the next tax law change to address your estate plan!