Years ago, the exemption against estate tax was only $600,000, and that forced many people to address their estate plans for tax reasons. With the exemption currently at $11,180,000, very few people have taxable estates, but really all of us have estate planning needs. Just because the IRS may have little to no claim to your estate, there are still many issues to address as part of an estate plan.
For example, do you know what happens to your assets if you die without a will? Assets that are titled jointly or have a beneficiary designation such as life insurance pass by operation of law to the joint owner or beneficiary. But the laws of the state in which you reside decide who inherits your individually-owned assets and personal belongings. For example, without a will, not all of your assets pass to your spouse, but, instead, some portion of your estate could pass to children. Here are ten things to consider when creating or updating an estate plan:
- A comprehensive estate plan not only includes your will and/or trusts but health and financial powers of attorney to designate agents who can make financial and health care decisions for you if you become incapacitated.
- Who should serve as your fiduciaries? The executor of your estate and your trustee will manage and distribute assets to your surviving spouse and/or children.
- You can decide who should inherit your assets by having an estate plan. Without a will, the state statutes decide for you, and it is possible that without a will you could disinherit someone you believed would receive your estate.
- Are there specific bequests you would like to make? Who would you like to have Grandmother’s china, Dad’s watch, or your wedding ring? You can outline such bequests in an estate plan.
- North Carolina law allows you to appoint a guardian for your minor children in a will. Otherwise, the courts will make that determination.
- Assets directly inherited by minors must be held in a court-supervised guardianship. Application must be made to the court for distributions, and when your child turns age 18, he or she will receive the remaining assets outright. An estate plan can include a trust for your minor children, where you can spell out who can control and distribute assets for them until they reach an age determined to be appropriate by you.
- Do you need to consider special circumstances? Comprehensive estate planning will include contingencies for a child with special needs, a blended family with children from prior marriages, or liabilities to a former spouse.
- You can protect your heirs from spendthrift behavior, spouses, and creditors through trusts.
- You can consider the proper disposition of your life insurance and retirement accounts by revisiting the ownership and/or beneficiary designations of those accounts.
- You can protect your business interests. Do the co-owners have an agreement that provides buyouts upon certain events and do you understand those provisions? Will the buyout be unfunded or backed up with disability or life insurance, and what are the income and estate tax implications of the buyout?
These are a few of the initial considerations you should discuss with your estate planning attorney. Of course, when you have a taxable estate, there are even more reasons to develop a thorough estate plan, not only to address the issues above, but also to mitigate your estate tax burden. Estate planning is not simply for the very wealthy; everyone should have an estate plan.
Westray serves as Fiduciary Counsel for Trust Company of the South, overseeing the firm’s legal matters, including its trust activities. Westray also serves as a resource to the firm’s individual clients with regard to their estate planning matters and to our nonprofit clients with regard to compliance issues. Prior to joining Trust Company of the South, Westray practiced law with Poyner Spruill LLP in their trusts and estates group. She has over fifteen years of experience advising clients in the areas of estate, generation-skipping transfer and gift tax planning, business succession planning, asset protection and estate and trust administration. Westray has been recognized in Business North Carolina Magazine’s “Legal Elite” for Tax and Estate Planning.
