Don’t wait until you are a senior citizen.
Estate planning preparedness studies that are conducted find that the vast majority of American adults do not have any estate planning documents in place. Obviously, most people do not pass away before their time, but why should you gamble with the well-being of your family?
When you buy car insurance, you don’t expect to be in an accident, but you want to be protected just in case. We would say that the same logic applies to estate planning, but you may never have a car accident; you are definitely going to pass away.
If you are going through life without an estate plan as a married person with or without children, you are definitely doing your family a disservice.
Be prepared to update your original estate plan.
When you put your initial estate plan in place, it will be based on the circumstances that existed at that time. Over the years, there can be additions and subtractions to the family, and you may have a change in marital status.
Your financial position could improve dramatically, and laws that impact asset transfers can change. You should be prepared to make adjustments along the way, and you should review your estate plan with an attorney periodically to make sure that everything is up-to-date.
You are probably in the clear when it comes to estate taxes.
If you are worried about taxes on inheritances that you will be leaving to your loved ones, you can probably set those concerns aside. A direct inheritance that is received through the terms of a will is not considered to be taxable income by the federal government or the state of Vermont.
This would also apply to life insurance proceeds and distributions of the principal that is held by a living trust. Distributions of the earnings in a trust would be subject to regular income taxes.
The beneficiary of a Roth individual retirement account would not pay taxes on the distributions, but distributions from an inherited traditional individual retirement account would be taxable.
When it comes to estate taxes, there is a credit or exclusion that can be used to transfer a certain amount tax-free before the remainder would be subject to taxation. The federal estate tax exclusion is $11.7 million, and the Vermont state estate tax exclusion is $5 million.
Don’t assume a will is the right asset transfer vehicle.
Far too many people think that trusts are only useful for high net worth individuals, but this is a misconception. There are trusts are used by wealthy people that are exposed to estate taxes, but there are other types of trusts that can be ideal for “the rest of us.”
The most commonly used trust is the revocable living trust, and when you understand the benefits, you can see why a living trust can be preferable to a simple will.
One of the positives is the fact that the assets can be distributed to the beneficiaries outside of probate. A will would be admitted to probate, and this is a lengthy, expensive legal process that strips you of privacy, because records are available to the general public.
You can include spendthrift protections when you have a living trust. This can be a major positive if you want to protect the assets from litigants and make sure that your loved ones do not burn through their inheritances too quickly.
A living trust is one possibility, but there are other trusts that can be used to satisfy certain specific objectives.
Account for end-of-life eventualities.
In addition to the financial part of the equation, your estate plan should address eventualities that you may face toward the end of your life.
For medical decisions, you can name a representative in an Advance Directive. A durable power of attorney for property can be added to empower an agent to manage your financial affairs.
If you have a living trust, you would act as the trustee while you are alive and well, and you can name a disability trustee to assume the role in the event of your incapacity.
Schedule a Consultation Right Now!
We are here to help if you are ready to work with an attorney to put an estate plan in place. You can send us a message to request a consultation appointment, and we can be reached by phone at 802-879-7133.