How Can You Pass Your Assets to Family?

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Following these five tips could help you pass your assets to your family.

You have worked hard your whole adult life.

When it came to managing your finances, you saved for retirement, made wise investments, and did not spend beyond your means.

You are now considering estate planning.

You want to pass your assets to your family rather than leaving a chunk of your life’s work to the government.

Even if the value of your estate is less than the 2020 federal basic exemption amount of $11.58 million for a single individual, your state may yet be one of those that levies a state estate tax.

(Fortunately, neither Kansas nor Missouri has its own estate tax or inheritance tax.)

What can you do?

According to a recent U.S. News & World Report article titled “5 Estate Planning Tips to Keep Your Money in the Family,” you can meet your estate planning goals by implementing proven strategies.

What strategies should you explore?

You will need to plan how to pass your assets to your family.
Your goals will dictate how you pass your assets to your family.

Create a last will and testament.

A last will and testament is a foundational estate planning tool.

Through a last will and testament, you can direct your assets through probate to your heirs.

Without a last will and testament in place, you will die intestate.

What does this mean practically?

You will have forfeited any control over how you pass your assets.

This will also mean the probate process will become longer and more complicated.

Unfortunately, only 32 percent of Americans have a last will and testament.


Mind your beneficiary designations.

Another way you can use to pass your assets is through the careful use of beneficiary designations.

Life insurance policies, retirement accounts, pay on death accounts, and transfer on death accounts are paid directly to the named beneficiary when you die rather than going through probate.

If you do not have up-to-date beneficiary designations, your assets could end up in the wrong hands.

Create and fund a trust.

Trusts serve several purposes in addition to being a means to pass your assets.

A trust can provide for irresponsible heirs while protecting them from their own poor decisions.

Trusts can earmark funds for specific purposes.

With an irrevocable trust, you can also minimize your estate tax liability.

Because they bypass probate, fully-funded living trusts can be an efficient and private means of distributing your wealth.

Convert traditional IRAs to Roth retirement accounts.

Traditional IRAs come with several restrictions when they are inherited by your children.

These rules increase their income tax liability due to the SECURE Act, which accelerated the time frame for distributions with limited exceptions.

If you gradually convert your traditional IRA to a Roth IRA, then you may be able to pass your assets to your heirs without the high tax bill.

This decision requires close coordination between your financial advisor and accountant.

Gift while you are alive.

Remember: if you are giving while you are living then you are knowing where it’s going.

If you choose to pass assets to your family while you are alive, you also can limit estate tax liability if you act strategically.

In 2020, you can gift up to $15,000 per person each year.

What does this mean?

The money is tax free for the recipient unless the asset appreciated in value.

If the house or stock grew in value, the heir will pay tax on the growth when later sold.

If you pass this asset when you die, it will receive a step-up in basis and there will be no capital gains tax up to that date of death basis.

Discuss your goals with an experienced estate planning attorney to develop the best plan to pass your assets to your family given your unique circumstances.

ReferenceU.S. News & World Report (Sep. 30, 2020) “5 Estate Planning Tips to Keep Your Money in the Family”

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