ESTATE PLANNING
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trust planning
Like trust planning, estate planning may not be fun to think of, but it’s absolutely necessary to consider, especially as you begin to accumulate years.
This planning is especially important to business owners or the extremely wealthy, but more so now as laws begin to sunset and administrations begin to take a hard look at estate exemptions, it’s a conversation worth having regardless of wealth.
In this section, we’ll briefly discuss estate planning basics and how Savvy & Suite can fulfill your estate planning needs.
What is the definition of an estate? An estate basically entails all of your assets that you have ownership of when you die.
This excludes any assets that you have previously placed in an irrevocable trust (see our nifty Trust Planning section for more information on this topic), but other than that, is largely a collection of everything else.
Why is this important? For estate tax purposes, this summation could potentially cause you to fall into estate tax territory, where rates range from 18% to as high as 40%.
However, there are ways to eliminate the risk of falling into estate tax territory, even the ability to take these steps while you are living.
Important note here: depending on the value of your aggregated assets, you may not be subject to estate taxes right out of the gate. This massive threshold (over $11 million in 2020) is set to expire in 2025, reverting to a much lower threshold.
This threshold is often placed in the sights of politicians as well, looking to gain tax revenues by lowering the threshold even further. This is exactly why it’s so important to have conversations about your estate, even if you don’t think you’ll be over the threshold.
You don’t know exactly when you’ll die or exactly what the exemption will be at that point in time, so it’s better to just plan ahead and know your options. Also of note, assets inherited by a spouse are not included in your estate, so that alone may solve some issues.
Still, it’s important to have sound estate planning even though this benefit exists, should something unforeseen happen to both yourself and your spouse.
The essential documents are as follow:
1. A will – We talk at length about this in our Trust Planning section, so we’ll just summarize why this document is important here: a will is needed, especially in the case of minor children, to make sure your last will and testament is executed precisely how you intend.
A will can also determine funeral arrangements and even stipulate where small items, such as heirlooms or collections not placed in trusts, get distributed.
2. A trust – This is hugely important, especially for estates that may be right on the edge of the estate tax exemption. Even if you aren’t on the edge, a trust is a great way to remove assets from your estate; what’s great about a trust is that it can be set up prior to death.
A trust also allows your assets to stay out of probate (the court system making sure your will is executed and your assets distributed), as they are placed under the guidance of a trustee. There are various types of trusts, so be sure to talk to your advisor regarding which option may be right for you depending on your goals.
3. A financial Power of Attorney – This legal document allows for someone other than yourself to represent your interests in financial matters. This is especially important as we age, as this can allow someone other than ourselves to perform even the simplest of financial matters, such as writing a check.
It’s important to distinguish between a general Power of Attorney and a durable Power of Attorney. The durable POA remains in place even if you become incapacitated (think coma, stroke, et cetera).
This is important because it relieves family members of unnecessary stress.
4. An Advance Healthcare Directive – This stipulates exactly what should and should not be done in certain medical situations. This is extremely important, because once again it takes stress off family members.
No family member wants to make the tough call in certain situations, so it’s better to have these plans in writing before the need even arises.
Regardless of your age, it may be wise to start considering these four documents. These documents, while not all financial in nature, are important to have as you begin your estate planning journey.
They are so important due to stressful nature of death; by having these documents (there’s even the argument that more should be obtained/executed), you’ve spelled out a majority of your wishes in both life and death. We’ve seen a few of these documents and would love to draw some up, where applicable.
This also goes back to how much we value our personal relationships with our clients, as we see these areas as necessary, even if not specifically tax or finance related.
Still have estate planning questions? Come to the best for estate planning in New York City.
We build a rapport with our clients quickly due to our decades of experience in this area. We’ll talk through any tax implications that come along with estate planning, but more importantly, we discuss your goals and put into practice any measures that may help you achieve those goals, even if they happen to be after you pass.
You’ve worked hard for your money and we want to ensure that what you want to happen to your money actually comes to fruition, even in death.
Dying unprepared could leave your assets in the hands of people you don’t want; getting started on a plan will reduce that possibility.
