Throughout 2024 we are conducting beneficiary reviews with all our families. This is essential work to maintain a fresh look at how our assets are both titled and setup for eventual disposition to our heirs. The Tax Cuts and Jobs Act of 2017 estate tax limits are set to expire on January 1, 2026. Barring any legislative changes the estate tax limit will revert to $7 million for individuals and $14 million for married couples. The reviews along with the potential changes have sparked good conversations about updating and/or reviewing everyone’s estate plan.
Estate planning might seem like a daunting topic, but it doesn’t have to be. It’s essential to have a solid plan in place to protect your assets and ensure your wishes are honored.
Although we might wish to sign it and forget it, estate planning isn’t just something you do once. It requires proactive management and regular reviews to keep up with life’s inevitable changes. Here are three foundational steps everyone should consider:
1. Wills Let’s start with the basics—wills. Think of a will as the foundation of your estate plan. It’s your legal document that outlines how you want your assets distributed after you pass away. Without a will, state laws dictate what happens to your estate, which might not align with your wishes.
Why Wills Are Essential:
• Control: You decide who gets what. From your prized art collection to your investments, a will lets you control the distribution.
• Guardianship: If you have minor children, a will allows you to name a guardian for them.
• Clarity: A will provides clear instructions, reducing potential conflicts among your heirs.
Quick Tips:
• Keep it Updated: Life changes—marriages, divorces, births, and deaths. Make sure your will reflects these changes.
• Legal Help: While DIY wills are available, consulting with an estate planning attorney can ensure your will is legally sound and comprehensive. We have a group of professionals we work with and are always happy to pass along our recommendations.
2. Living Trusts Next up, let’s talk about living trusts. A living trust, or revocable trust, is a legal entity where you can place your assets during your lifetime. You maintain control over those assets and can change the trust as needed.
Benefits of Living Trusts:
• Avoid Probate: Assets in a living trust don’t go through probate, which can be a lengthy and costly process.
• Privacy: Unlike a will, which becomes public record, a living trust remains private.
• Continuity: If you become incapacitated, a living trust allows a trustee (someone you designate) to manage your assets without court intervention.
Quick Tips:
• Fund the Trust: Simply creating a trust isn’t enough. You need to transfer your assets into it. We can help with this!
• Choose a Reliable Trustee: This person will manage your assets if you’re no longer able to. Select someone you trust implicitly.
3. Lifetime Gifting Lifetime gifting involves giving away some of your assets during your lifetime. Not only does this allow you to see the impact of your generosity, but it also has significant tax benefits.
Advantages of Lifetime Gifting:
• Reduce Estate Taxes: By gifting assets now, you can reduce the size of your taxable estate.
• Annual Exclusion: The IRS allows you to gift up to a certain amount per person each year without incurring gift taxes.
• Educational or Medical Expenses: Payments made directly to educational institutions or medical providers on behalf of someone else don’t count toward the annual exclusion limit.
Quick Tips:
• Plan Your Gifting Strategy: Work with your team at PrairieFire to develop a solid plan. We can analyze the impact of gifts along with building a charitable gifting plan as well.
• Document Gifts: Keep thorough records of all gifts to ensure compliance with IRS regulations.
A solid estate plan is crucial for protecting your assets and ensuring your wishes are honored. By incorporating wills, living trusts, and lifetime gifting into your estate plan, you can safeguard your wealth and provide for your loved ones.
Remember, estate planning is an ongoing process. Regularly review and update your plan to reflect life changes and evolving financial goals. If you’re unsure where to start or need help navigating the complexities, please let us help.
