Piercey & Associates, Ltd Discusses The Basics Of Estate Planning And Recent Changes

By Staff Reporter Feb 18, 2021 10:19 AM EST

Everyone needs to consider estate planning, especially if they have a significant amount of property, cash, or investments. Without estate planning, it is possible that a large portion of your hard-earned assets will go to taxes and probate court fees, leaving your spouse and children in a bad situation.

Estate planning is one of the kindest things you can do for your family. If you leave your estate unplanned, your family may experience conflict over which properties are left to which people, and your family may even experience estrangement based on the outcome. You will need to come up with a plan well in advance of old age since no one knows precisely when their time will come.

Piercey & Associates Ltd. is an expert law firm well-grounded in the principles of estate planning. The company provides a guide to estate planning and the changes in the law that have happened in 2020 and 2021 that may affect your family's future.

The Basics of Estate Planning

In its most basic form, estate planning involves deciding what should happen to your assets after your death. The estate planning process also considers who should be in charge of your responsibilities during this time. Many people with fewer assets accomplish this through writing a will or power of attorney, but when there are significant assets to allocate, such as real estate, a full estate planning process should be undertaken.

Here are the steps that everyone should follow for estate planning purposes:

1. Make an Inventory of Your Possessions

Before you can decide how to dispose of your assets, you will need to know exactly what you have on hand. Homes and other real estate, collectibles, vehicles, and other personal property can be considered under estate planning. Intangible assets include bank accounts, investment accounts, life insurance, retirement plans, health savings accounts, and an ownership stake in a business.

2. Decide What Your Family Will Need

You need to make sure that you have enough life insurance. Especially if you are the breadwinner in a single-income family, you need to make sure that your insurance would cover living expenses for your surviving spouse and children in the event that something happens to you. You will need to make sure that your survivors can pay the mortgage and also pay for any other expenses including children's college tuition.

3. Plan for Child Custody

If you still have children at home, it is imperative that you choose a guardian for them. It is a good idea to have a backup guardian in your will as well. This will keep your family from having to endure protracted fights in court over who will have custody of your children. Make sure that your specific wishes for your children's care are put in writing.

4. Set Up Your Directives

Many people set up trusts when they are planning their estate. There are several different types of trusts that can be part of an estate, including living trusts, charitable trusts, revocable trusts, irrevocable trusts, and asset protection trusts.

A trust boils down to a legal arrangement between the trustee (your survivor in charge of your affairs) and the trustor (yourself). Trusts have beneficiaries, including your spouse and children. In the case of a charitable trust, you may designate a special organization as one of your beneficiaries. All of the types of the property mentioned above can be part of a trust agreement.

The advantage of a trust over a will alone is that you can pass your assets along to your survivors without going through probate court. Probate court is required for people who only have wills. You can create a specific plan for managing your assets if you die or become incapacitated. Having a trust in place could also reduce your gift and estate taxes in some situations.

Two Major Types of Trusts

The two major types of trusts are revocable and irrevocable trusts. Most people who have trusts choose to put revocable trusts in place while they are alive. These trusts allow you to retain control of your assets while you are capable of managing them yourself.

Irrevocable trusts, in general, cannot be altered once they are put into place. The advantage of an irrevocable trust is that it takes certain assets out of your estate. This means that they are prevented from incurring estate and gift taxes. They may also prevent your assets from creditors' claims, beneficiaries' demands, and Medicaid.

Recent Changes in Estate Planning Law

One exciting provision that came into effect in 2020 was the increase for the federal estate tax exemption. Today, $11.58 million per person is exempt from the estate tax.

There are new rules governing the passing down of IRA accounts. You can leave your IRA to your spouse so that they can roll it over into their own account and defer tax payments and withdrawals during their lifetime. However, if you leave your IRA to someone else, this period is restricted to 10 years, with limited exceptions.

Trust decanting allows for additional flexibility and provides a method for trustees to change some of the provisions of an irrevocable trust by placing the property in a new trust.

Planning in Times of Uncertainty

The coronavirus pandemic has brought many people an increased awareness of their own mortality. This has made people perform estate planning tasks with more urgency. Piercey & Associates Ltd. believes that estate planning is even more important in these uncertain times.

Planning Your Estate

You should always consult with an experienced law firm like Piercey & Associates Ltd. if you have any questions about tax and estate laws and how they will apply after you have passed on. Protecting your assets is a must and will allow you to provide for your spouse and children in the future as well as making plans for your properties.

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