Successful estate planning does not just happen.
The past year has been one filled with much loss.
People have been let go from jobs.
In fact, jobs have disappeared.
The robust economy under President Trump has been crashed.
Loved ones have died.
According to a recent Accounting Web article titled “A Simple Guide to Estate Planning Best Practices,” these losses and uncertainties underscore the necessity of estate planning.
What can you do to prepare for your own death or the deaths of your loved ones?
Start with a last will and testament.
Whether your estate is large or relatively small, creating a last will and testament will benefit you.
Without one, the state law where you live could determine who inherits your assets.
This means your assets could be inherited by distant relatives or squandered by irresponsible heirs.
With a last will and testament, you can choose your heirs, name your executor, and select a guardian for your minor children.
Think about your estate planning goals.
Working with an experienced estate planning attorney allows you to clarify your goals.
If you have already created an estate plan, your circumstances and goals can still change.
You should review your estate plan every few years.
In the past five years alone, there have been many new tax laws passed.
These laws can influence your estate planning goals and choices.
Your goals may require the addition of a trust to your estate plan.
Consider low-cost wealth transfers.
Transferring money to your loved ones while you are alive can help to decrease your taxable estate.
With an intra-family loan at a minimal federal interest rate, the younger generation can invest assets while keeping the appreciation of these assets outside of your taxable estate.
This should not be attempted without the help of an experienced attorney.
Grantor Retained Annuity Trusts (GRATs).
These are particularly attractive because of their low interest rates.
You can keep an annuity interest in a separate trust and leave the remainder to beneficiaries when you die.
The beneficiaries will only need to pay taxes on the remainder of the value when the value of the annuity is taken from the value of the GRAT-constrained property.
By the way, you can plan for market volatility by combining assets in long-term and short term trusts.
Grantor Trust Acquisition of Assets.
This trust option is complicated but can be effective in certain situations to reduce taxes on your assets.
You can sell the assets to a grantor trust.
Although the sale may require taxes, these will be applied at a reduced rate.
The creation and funding of the trust can utilize a portion of your gift tax shelter allowance.
What does this mean?
The assets in the trust will not be subject to a transfer tax in the future.
You will still be required to report all income generated from the trust.
You can sell appreciated assets to the trust without triggering capital gains taxes.
Because of this complexity, you will require the services of an experienced estate planning attorney.
Prepare now for the likelihood of higher taxes on your assets.
Reference: Accounting Web (June 23, 2021) “A Simple Guide to Estate Planning Best Practices”