Considerations Of Estate Planning

Considerations of Estate Planning

When preparing for the end there are many things to consider. Estate planning can help avoid a long drawn out probate and unnecessary fighting among your loved ones. Here is a list of questions and directions you consider when planning your estate.

1. 1. 1. Who gets my property?
      2. Do I give them the property outright or have someone hold it for them (in “trust”)?
      3. Who will take care of my children?
      4. How can I accomplish the “who gets what” part of my estate at the same time reduce:
         1. taxes,
         2. the cost of getting the property to my beneficiaries, and
         3. the length of time this will all take? (This last area requires expert advice and planning. You may know who is going to get the property but planning in this area can get the property to them when you want and get more property to them with less “middleman” costs.)
   2. WHILE LIVING
      1. If I am unable or unwilling to manage my financial affairs, who will handle them for me?
      2. If I still want to handle my finances, who can help me with record-keeping, tax questions, carrying out transactions, etc.?

Technical Estate Planning

1.  WAYS TO PASS ON PROPERTY & OTHER TECHNIQUES

There are many ways to pass on a property at death and to provide for other considerations. Each has its own advantages and disadvantages. It is important to pick a combination of methods that fit.

1. 1. GIFTS
      1. Benefits

A gift certainly benefits the recipient (“donee”).

1. 1. 1. 1. It avoids probate.
         2. Income from the property is taxed to the donee.
         3. The increase in value (“appreciation”) after the date of the gift avoids estate taxes.
         4. The exemption for the federal gift tax in 2020 is $15,000 per year per gift recipient (except spousal gifts which are unlimited). Gifts exceeding this amount may require the filing of a gift tax return and reduce your lifetime federal credit equivalent.
      2. Costs

Obviously, there is a cost ‑ your giving it away! This is unacceptable to most people unless they have a tax problem or feel they will not need the property in the future. It also exposes the assets to creditors of the recipient.

1. 1. WILLS & KEEPING PROPERTY TITLED IN YOUR OWN NAME

This property must go through “probate.” (“Probate,” as it is commonly known, is the court‑supervised procedure of identifying what property you owned, paying debts and taxes, and determining who is now rightfully entitled to it.) You can go through probate either with a will (testate succession) or without a will (intestate succession). It is almost always better to do it with a will.

1. 1. 1. Benefits

What happens with your property, as far as who gets it, is generally under better control than with a “joint tenancy” arrangement. Further, without incurring Trustee’s fees during your lifetime you can:

1. 1. 1. 1. set up a trust to control the property at death for someone who needs or wants to have the property managed for them, and
         2. set up a trust for tax reasons. (See the section on taxes below.) Trustee’s fees would normally start only after your death.
      2. Costs
         1. This is generally the most expensive approach and involves the most delay. Both the cost and the delay can be reduced by a well‑drafted will, which contains good “administrative provisions,” and an experienced “executor.” “Administrative provisions” govern the procedure to be followed when going through probate. For example, you can give your executor the power to sell real estate without first asking the court to do so. This cuts down on court involvement and therefore saves time and money. An “executor” is the business agent for your estate who makes sure your property is collected, bills paid, all tax returns are filed and taxes paid, and all distributions of your property made to the people you want.) Fees can run about 5% of the first $100,000 for each of the executor and the attorney for a total of 10%, or $10,000. A minimum of 9 months from the date of death is allowed for administration.