Now that the federal estate tax exemption has surpassed the 10 million dollar level, many individuals have become less interested in estate planning.  Many do not think it is necessary or it may be far less important.  Let’s review a few of the reasons most of us should consider reviewing our plans.  Some of the more common reasons are:

  • To recommend a guardian for our children
  • To direct assets to the appropriate beneficiaries
  • To name an executor or trustee to manage the probate process

However, there are many more considerations that my impact your planning.  We will highlight a few.

Many wills and trusts drafted before the latest round of tax changes used formula provisions directing or dividing assets between spouses and children.  These formulas may now misdirect assets away from intended beneficiaries.

For those with parents or disabled family members who may need assistance in later years, no planning could leave them with inadequate support.  Effective planning can provide them with additional financial security.

Tailored documents leaving assets in trust for children can incentivize good behavior such as pursuing higher education and discourage or penalize bad conduct such as the use of illegal substances or other inappropriate activities.

Assets held in trust can provide asset protection.  For example, property held in trust can be sheltered from the claims of creditors, litigants and ex-spouses.

Estate planning documents can be used to assist in the transfer of businesses and provide for management transitions in the event of death or disability. 

Many times, the estate planning process allows individuals the time to plan and create approaches for the efficient funding of charitable causes.

It is important to be sure retirement plan beneficiary designation forms are kept up to date.  Often these important forms are lost or misplaced.  The loss of these forms can disrupt planned estate distributions and income tax planning.

Has appropriate funding been provided to benefit your heirs? Have life, disability and health insurance been considered and is planning up to date.

Life insurance can be a tool to provide for children’s future education in the event of a premature death.

It is important to consider whether it is best to have assets pass to heirs at death to receive a stepped-up cost basis for income tax purposes or, in the alternative, pass during the donor’s life as a gift with carry over basis. 

Estate planning can impact income tax savings for you as well as estate tax savings for the ultimate beneficiaries.  Planning for the distribution of retirement saving is especially important in many cases.

Estate planning also can be a time to consider alternates for extended long-term health care needs and advance planning techniques to minimize nursing home costs.

Have you executed a power of attorney form to allow a family member to handle your financial affairs if you are incapacitated?

In addition, it is important to provide input to family on health care wishes.   Everyone should have prepared a Health Care Proxy to allow family to obtain medical records and provide input on your care if you are unable. It is also helpful for your survivors to know your thoughts regarding funeral and cemetery arrangements.

A final point is the need to have financial and personal records accessible for family members should something happen to you.  How can they access electronic files and bank accounts? 

While not an exhaustive list, the intent is to make you aware of the importance of planning, whether for tax or other important life and financial issues.  It is best to review these issues with your financial advisors on a periodic basis.

This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.


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