Estate planning is all about protecting your loved ones, which means, in part, providing them with protection from the Internal Revenue Service (IRS). It involves determining how a person's assets will be preserved, managed, and distributed after death. It also takes into account the management of a person's assets and financial obligations in the event of incapacitation. It is essential for estate planning to transfer assets to heirs with a view to creating as little tax burden as possible for them.
Estate planning involves creating a plan that establishes who will eventually receive your assets. It also lets you know how you want your affairs handled in case you can't handle them on your own for some reason. It's a complicated process, and it can definitely be overwhelming. There are many components to estate planning, and while there is a common misconception that it's just about your finances, the truth is that there is a lot more to it.
If you were to ask 10 different couples what their estate planning goals are, you'll probably get 10 different answers. However, after a deeper survey, you'll find that most married couples share the same basic estate planning objectives. Knowing these goals helps both the couple and their estate planner determine what might be the best way to structure their estate plan. The most common objectives include minimizing taxes, protecting privacy, ensuring assets pass to the appropriate beneficiaries, and avoiding probate and asset approval while avoiding high taxes.
Minimizing taxes is an important goal for married couples as it helps maximize the amount of assets that go to their loved ones. Many couples also prefer estate plans that maintain their privacy when given the option. This tends not to be a dominant problem in most couples but recently there has been an increase in the number of elderly people being targeted by fraudulent schemes and near-fraudulent requests. As a result, an estate plan can help protect the surviving spouse from being targeted by such plans.
When most people consider estate planning goals, they think about controlling who their assets will go to after they die. In fact, this is one of the objectives of estate planning, but it is far from the only one. Knowing that you have a plan prepared properly, one that contains your instructions and that will protect your family, will give you and your family peace of mind. Your financial advisor can also help you find a qualified attorney to draw up your estate planning documents.
There are some tools you can use within your estate plan to avoid probate and asset approval while avoiding high taxes. An experienced estate planning attorney can explain all the options available to you to meet your goals and meet the needs of your loved ones. Without an estate plan, courts will often decide who gets your assets, a process that can take years, accrue fees and get ugly. Previously, properly preparing the types of documents included in an estate plan could cost you thousands of dollars.
You should review your estate plan every few years, every time you experience a life-changing event or if Congress makes any changes to the estate tax law. Inheritance tax is collected only by states but both federal and states can collect estate taxes.
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