Are you looking to plan your estate and make sure that your loved ones receive as much of an inheritance as possible? Do you wish there were a way to minimize the taxes they'll owe as a result of inheriting your estate? If so, then you need to learn all that you can about the process.
Doing so can help you understand what it takes for your loved ones to inherit the amount that you had intended. We've put together a few estate planning tips to get things going in the right direction.
See below for several estate planning tips that you should consider while you get your estate plan in order. Otherwise, a large portion of it won't be going to who you intended.
1. Consider a Next Generation Transfer Trust
We'd bet top dollar that a majority of you reading this have never heard of a generation skipping trust before. Many people's estates have landed in the wrong hands simply because they didn't know this was an option for them.
For those of you unfamiliar with the term, a generation-skipping transfer trust is a trust that gives you the ability to name your grandchild as the beneficiary. It, therefore, skips a generation (hence the name) and prevents your children from ever having control of it.
For the trust to be valid, the recipient has to be at least 38 years younger than you to be named on the trust. Blood relation is not a requirement.
It's a great way for you to oversee the delegation of your estate. Rather than putting it all in your children's' hands with the wish of them passing part of it on to their children, you can take the responsibility out of their hands. It's a perfect choice for any situation that you see fit.
2. Assign a Health Care Agent
Unfortunately, there might come a time in which you are unable to make medical decisions for yourself. For example, you might not be in the right state of mind, unconscious, or a coma. In those situations, it's important to have someone that you trust making the medical decisions and seeing that your health care wishes (whatever they might be) are seen to.
To do this, you need to sign a medical power of attorney. This is a legal document that allows you to name one person as your "health care agent" in a medical emergency. They'll be the ones discussing your care with the doctors and making sure it lines up with your wishes.
For example, you might not want to place the heavy decision of whether or not to pull the plug on your loved ones. With a medical power of attorney, you can record your wish for the end-of-life decision to be made under certain conditions. That way, your health care agent can abide by your wish and decide out of your loved ones' hands.
You can make anyone your medical power of attorney. Decide who you trust to carry out your wishes in a highly-sensitive moment.
3. Understand the Process
Even the slightest hiccup on your estate plan can result in your loved ones paying the consequences after you've passed. Don't leave that up to chance. Hire a professional who can shine a light on the entire process and make it as easy as possible for your loved ones.
First, you'll start by determining all of the assets that you have in your name, as well as the liabilities. Each of these will be left in the hands of who you deem responsible when you determine who your beneficiaries are, and what they inherit specifically.
From there, you'll decide who you trust to manage your plan, who will be your power of attorney, and health care agent (as mentioned above).
Lastly, if you have children under the age of 18, you'll need to decide you will be their guardians if you were to pass away. As taboo as it might be to think about, you want to make sure they have a path to success.
4. Minimize Estate Tax
Unfortunately, the rich often get penalized for their large estate. This is especially true during inheritance. The good news is that there are several ways to try and avoid it.
First, give gifts whenever you can. You and your financial planner can strategically give gifts to your loved ones for up to $11.4 million (current federal tax exemption limit).
You can also set up a CLT (charitable lead trust) to donate to charity and lower the value of your estate to get a better tax break for your trust recipients.
Take the time to consider an irrevocable life insurance trust, which helps you establish a trust and transfer it to whomever you'd like.
5. Keep Your Beneficiaries Refreshed
Often, life happens when you least expect it. You might have things in your name that don't currently have your preferred beneficiary listed.
For example, if you were married at the time that you set up your life insurance policy, your ex-spouse might still be listed as its beneficiary when you die. Be sure to update them all as soon as possible.
Things like pension plans, life insurance policies, brokerage accounts, and retirement accounts all abide by the beneficiary you list, not your will. Keep those up to date so that these valuable assets don't fall into the wrong hands.
Use These Estate Planning Tips to Your Advantage
Now that you have seen several estate planning tips that you can use to your advantage, you must do so.
Take the time to consider all that you have to plan for with your estates. Meet with a professional that can help you decide how to delegate them and avoid estate tax, also known as the death tax.
Be sure to browse our website for more articles on estate planning, as well as many other helpful topics that you will enjoy. We are here to help you with estate planning tips, funeral advice, will suggestions, and inheritance among other related topics.
