Some people oversimplify the process of estate planning. They reduce the endeavor to the creation of a last will, and they leave it at that.
In reality, there are a lot of things to take into consideration. There are many different ways to facilitate future asset transfers. A last will may not be the best choice for you.
If you have a last will, you lose a good bit of control. The assets would be divided like slices of a pie, and the inheritors would assume direct personal control of the inheritances. This is not always a good thing.
For example, there is an estate tax. It carries a $5.34 million exclusion. Asset transfers that exceed this amount are potentially subject to the estate tax and its 40 percent top rate.
There are ways to facilitate asset transfers in a tax efficient manner. However, if you use a last will, you are gaining no tax advantages.
Plus, consider the tendencies of the people on your inheritance list. You may have a loved one who is not a very good money manager. If you simply name this person in your last will, he or she could squander the money quickly, and this could have negative long-term consequences.
It would be possible to make a poor money manager the beneficiary of a spendthrift trust. You could have the trustee manage the funds, and you could be sure that the beneficiary does not burn through his or her inheritance too quickly.
These are just a couple of different scenarios that can exist. There are estate planning tools that can be used to address any objectives that you may have.
Incapacity Planning
Even if a last will is an adequate choice for you, additional documents are required. Incapacity is quite common among people who reach an advanced age. The oldest segment of the population is growing faster than any other according to the U.S. Census Bureau, so you may well live into your eighties and perhaps beyond.
If you were to become unable to make your own decisions, a guardianship hearing could be convened, and the state could ultimately empower someone to represent you.
You can take this decision out of the hands of the state through the execution of durable powers of attorney. When you create a durable power of attorney, you name your own hand-picked decision-maker to act on your behalf in the event of your incapacitation.
An incapacity plan will typically include a durable financial power of attorney for financial decision-making, and a durable power of attorney for health care.
Special Report on Last Wills
We have prepared a special report on last wills. If you would like to obtain more detailed information, download this free report. You can obtain access to your copy through this link: Indianapolis Estate Planning Information.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
- Updated Federal Gift and Estate Tax Figures for 2023 - January 26, 2023
- Why Estate Planning Is Important for Multi-National Couples - January 24, 2023
- When Do I Need to Update a Trust Agreement? - January 19, 2023
