Is it time to update your estate plan?

Is it time to update your estate plan?

By Kathy Blomeke

Estate planning is an ongoing process. If you are young, your plan might consist of simply a Will. If you are a young couple, and you have children, it is important to name a guardian and arrange to provide for your children and spouse in the event of an unexpected death or incapacity. As you start to gain financial success, preserving assets and avoiding taxes become important factors in estate planning.

If you die without a Will, the court in the state you live will choose an administrator for your estate. If you have minor children, the court will also appoint a guardian for your minor children. The court’s choice may well not be the person you would have selected. The property you own in your individual name will be distributed according to the state intestacy laws. This may not be the way you want your property to pass. If your heirs include minors at the time of your death, the minors will automatically receive their shares of your assets outright once they reach the age of majority, whether or not they are experienced enough to manage their inheritance sensibly.

Presently, a top marginal tax rate of 40% applies to taxable gifts and estates. If your net worth is close to or over the federal exemption amount ($5,450,000 per person for 2016), your estate plan needs to include tax planning also. (The exemption amount increases to $5,490,000 per person for 2017.) Unless you plan for taxes, they can consume a large part of your estate. The estate tax is complex and requires not just looking at your current net worth, but also prior gifts and the ability to transfer any unused estate exemption amount between spouses (referred to as “portability”).

For calendar year 2016, the first $14,000 of gifts to any person (other than gifts of future interests in property) are not included in the total amount of taxable gifts.  The annual gift tax exclusion will remain at $14,000 for 2017.

If you are a business owner, this brings another facet to estate planning. It is important to arrange in advance for the transfer of your business at your death, incapacity, and retirement. If you want family members to continue the business after your death, it is important to be sure there is enough cash available to cover estate tax, if applicable, and to cover expenses. If you do not plan ahead for this, your heirs may have to sell the business or business assets to cover taxes and expenses. A buy-sell agreement put in place now can make for a much smoother transition at death, incapacity and retirement.

While we cannot prepare your estate plan documents, as this must be done by your attorney, we can assist you in updating your plan. We can help you estimate your net worth, determine how your assets are titled, and review your current plan if you have one. We can help you get a plan in place if you do not have one, or we can discuss the steps to update your estate plan to meet the ever changing laws and to reflect any personal changes in your lives. Everyday personal and family changes can make yesterday’s estate plan inadequate today. Give us a call if you would like to discuss your estate plan.