It’s hard for anyone to consider their own mortality. However, that doesn’t mean you don’t need to protect your family by making sure you have a well-designed estate plan for distributing your assets, communicating your intentions and getting organized. Think of it as tidying up your life.
Forbes’s article, “Estate Planning: What You Need To Know,” says that this preparation means asking yourself questions that can make you uncomfortable, like the following:
- Will my family have the financial resources to thrive, if I were to pass away unexpectedly?
- If I’m unable to care for myself, who should make financial and medical decisions on my behalf?
- If I’m terminally ill or seriously injured, what life-sustaining efforts would I want to receive (if any)?
- What assets do I want to leave for my spouse, children, favorite charity and others?
- How do I protect my assets from creditors or ex-spouses?
- How do I lessen the tax exposure of my estate?
You need to answer these types of questions while you’re still here, so you don’t risk them being made for you by others.
When creating your estate plan, first get your financial life in order. Make a list of all your assets. Then keep it in a location that can be easily accessed. This will give you a pretty good sense of your net worth. You can then create a plan that will ensure your estate will be managed according to your wishes.
You can give away some of your wealth over your lifetime, but the annual gift tax exemption is the amount you can gift, tax-free, to a person in any one year. There is no limit to the number of gifts you can give. You can give one or multiple gifts as long as none of them exceeds the exemption. The exemption is $15,000 for 2019. In addition, there’s a lifetime gift tax exemption, which is the total amount you can gift over your lifetime without incurring a tax. In 2019, the exemption is $11.4 million. The total amount you gift over your lifetime gift tax exemption will correspondingly decrease your estate tax exemption, when you pass away.
You should also prepare yourself and your loved ones for the inevitable. Don’t wait for a scare or crisis to start this process. It’s critical that everyone understand your plan ahead of time.
If you don’t have an estate plan, the laws of your state will determine who in your family should take control of your possessions in the case of death. If you become incapacitated and there is no plan for disability, family members won’t know what your end-of-life wishes are. Speak with an estate planning attorney and put in place, for yourself and for your family’s benefit.
Reference: Forbes (August 6, 2019) “Estate Planning: What You Need To Know”