This is the most common question that I hear as Americans are adjusting to the new tax laws enacted last December. “The limits are so high that I will never have to pay estate taxes, so why bother?” The new Federal Estate tax limit (above which Federal estate taxes will be payable) is $11,200,000.00 per person. Yes, most of us will not hit that limit, but 19 of the 50 states, Illinois included, impose an estate tax of their own ranging from .25% to almost 20% of your estate. The tax tail should always not wag the dog however, and there are additional reasons to put pen to paper and have an estate plan to spell out your desires.
Distribution of Assets – how will you pass your assets on?
- Who should get Grandma's yellow pie plate or Grandpa's WWII medal collection?
- How do your children handle money? Is a trust appropriate for all or some of them? Who will be guardians to your minor children? When should funds be distributed? What will the trust pay for?
- Do you have Grandchildren? Are there Generation Skipping taxes to plan for?
- Does anyone you plan to distribute assets to have special needs? Could it happen in the future? They may need planning to keep them eligible for benefits.
- Do you have any digital assets, social media accounts, online access to anything, digital currencies?!?!?
- Do you own a business? How would you feel if your Son-in -Law or Daughter-in-law inherited that business? Are some children involved in the business while others are not?
- Do you have rights to appoint assets from another estate or Trust from your parent(s) or other person who named you in their estate plan? That needs to be accomplished through your will.
- Who will handle all of the decision that you make and carry them out as you desire?
Gifting and Other considerations –
- Do you have any charitable organizations, individuals outside of your family, or wayward children you wish to make a one-time gift to?
- What happens if the tax laws change? The current tax limits are set to sunset in 2025 and go back to 2017 levels.
- What happens if you win the lottery? (It could happen!)
- Increasing the amount of Life Insurance you own could put you over the Federal or State estate tax limits.
- Do you want to leave an ethical will for your family and loved ones, explaining what is important to you and why?
Lastly, Life time Planning is addressed by an estate plan.
- Your retirement benefits or other financial benefits from a workplace, and who you name as beneficiaries of either of those types of assets;
- Who will act for you with regard to your assets, if you cannot act for yourself for any reason?
- Who will act on your behalf with regard to medical care?
- Who will make end of life decisions and can be trusted to carry them out as you wish?
Working with a trusted Estate Planning attorney can help you efficiently make these decisions and more with regard to your estate plan. Even if you have an estate plan, your situation may have changed since you put it together and it may need updating to meet you changing need and the changing tax landscape.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.