With the estate tax exemption limit currently set at almost five and a half million dollars, many Indianapolis residents might have the impression that estate planning is no longer as important as it once was. Some assume that estates with values below that exemption amount are simply too small to need any sort of complex planning, or that everything will just be sorted out in probate court after they die. The fact is that estate planning is still a critical issue for everyone, since estate taxes are but one of many concerns that need to be addressed when you want to ensure that you keep your wealth in the family after you’re gone. That’s why it is so important to know the Indiana inheritance laws and these vital estate planning tips can help you better prepare for the future.
Make Sure You Have a Will
Did you know that more than half of all Americans have a Last Will and Testament? That’s a serious gap in planning that is sure to keep probate courts busy well into future! Your will is an important component of your overall estate planning effort, and can help to make the settling of your estate less painful for your heirs and other loved ones when you die. Even if you have an estate plan that includes living trusts, you should still have at least a Pour-Over-Will to ensure that assets that you fail to properly title can be more easily distributed after death.
Verify Your Insurance Beneficiaries
Though many people think of the Last Will and Testament as the only real option for distributing assets after death, nothing could be further from the truth. The reality is that life insurance policies have provisions that enable automatic payouts to named beneficiaries. Many retirement accounts have the same type of beneficiary provisions, enabling those assets to be transferred to new owners automatically when the original owner dies.
It is important, therefore, to ensure that you have properly named your chosen beneficiaries, so that there is no need for probate to determine where those assets go after you pass away. And since life is just one series of changes after another, you should review all of your policies and funds from time to time to make sure that everything is as up to date as possible. Moreover, you should schedule a review after each major life change – including events like marriage or divorce, the birth of a new child, and so on.
Consider How Income Tax Could Affect Retirement Accounts
Did you know that a traditional IRA or 401(k) account can be subject to income tax if you have it set up to pass to anyone other than a spouse when you die? That could leave your estate worth less after you pass away, and reduce the inheritance you leave for your loved ones. Financial experts often suggest that you alleviate that tax liability by gradually converting traditional IRAs into Roth IRAs that enable distributions to be made tax-free.
Create a Trust
If you’ve always thought that your estate wasn’t sizable enough to merit the creation of a living trust, you’re definitely not alone. Many people still assume that trusts are things only the wealthiest of families ever really need. That’s a misconception, though, since almost anyone can benefit from at least one form of trust. In fact, trusts have evolved to the point where they can be used to accomplish a wide variety of estate planning goals.
Living trusts can be effectively used to ensure that your assets are managed in accordance with your wishes when you die. They can even help to ensure financial stability and continuity in the event that you are incapacitated – though you’ll still want Powers of Attorney for both financial and health care decision-making. And if you have a spendthrift relative who would undoubtedly waste his inheritance if he received it all at once, a trust can be a great way to distribute his share of the estate over time or with certain conditions attached.
Transfer Money Before You Die
It’s sometimes surprising to see how many people neglect one of the most obvious solutions to the problem of ensuring that their money stays in the family when they die: gifts. If you have sizable assets and are truly concerned about future taxes or other issues that might impact your heirs’ inheritances, consider giving them at least part of that inheritance while you’re still alive. Under IRS rules, you are allowed to gift as much as $14,000 to any individual each year. That money is tax-free for those who receive it, and can be a great way to reduce the size of your estate.
There are other advantages, of course. If your estate is large but not large enough to cover the high costs of nursing care that you might need in the future, these gifts can be a great way to ensure that you lower the value of your estate so that you can qualify for Medicaid benefits. Just be sure to complete all transfers at least five years prior to applying for aid. Gifts also offer a way to let your heirs enjoy at least part of their inheritance while you are still around to see it.
Doing it On Your Own
The last tip may actually be the most important, and it has to do with those do-it-yourself estate planning options you may have seen advertised online and elsewhere. These are downloadable forms and programs that suggest that you can do all of this without any outside help. While it might be tempting to think that you can create a seamless and legally-sound estate plan on your own – and thus avoid attorney’s fees, you should be realistic about your expectations. Even the smallest error in your self-created will or trust could render it void and leave you without any estate plan – and subject to the state’s intestacy laws.
To ensure that you get your estate planning done right, you should rely on competent legal assistance from trusted lawyers in your area. For residents in Indianapolis and surrounding areas, the best option is to contact a trusted firm like Frank & Kraft Attorneys at Law. Our legal team can help to provide the guidance you need to successfully prepare a legacy that you’ll be proud to pass on to your loved ones. To find out more, contact us online or give us a call at (317) 684-1100 today.
- How to Find the Right Caregiver for a Parent - September 27, 2022
- What You Need to Know about Elder Financial Exploitation - September 22, 2022
- Using a Letter of Instruction to Supplement Your Estate Plan - September 20, 2022