One of the biggest mistakes people make in the area of estate planning is to incorrectly assume they do not need to put a plan in place. This leaves a large portion of the population in either an unprotected or under-protected position and because a lack of planning does not produce negative consequences until an emergency arrives, they are often not aware of this planning gap. A critical step to making sure your family has all of the protection it needs is gaining an understanding of the main areas of risk, so you can confirm that protections are in place to eliminate or minimize the effects of those risks.
Do I Need More Estate Planning?
By answering the following questions, you will be able to determine your need to consult with an estate planning professional to create estate planning solutions to protect your family:
- Is a plan in place to ensure that trusted individuals are empowered to assist with financial, administrative and medical decisions in the event of an illness or accident?
- Have steps been taken to ensure that assets will pass to beneficiaries following death without being exposed to the time, expense, and hassle of court-supervised probate?
- Are there planning measures in place to ensure that the proper beneficiaries receive the proper assets upon death? If so, does that plan address issues such as the incapacity or death of a beneficiary prior to distribution, and distribution to a beneficiary who may not be ready to manage the assets he or she will be receiving (e.g., until a younger beneficiary attains a certain age)?
- If you total the value of all of the assets (including life insurance policies and retirement accounts), can you say with certainty that the current value is less than the Federal estate tax exemption ($5,450,000 in 2016) and that the value, when added to any estimated future growth (including potential inheritances), will not exceed that figure in the future? If not, have you put a plan in place to address potential Federal estate tax liability?
- If local/State estate taxes are relevant (i.e., if the applicable local/State law is one of 15 jurisdictions that imposes a separate local/State estate tax in certain circumstances), can you say with certainty that the value of all of the assets is less than any applicable local/State estate tax exemption (e.g., $675,000 in New Jersey in 2016)? If so, can you say with certainty that the value of the assets, when added to any estimated future growth (including potential inheritances), will not exceed that figure in the future? If not, have you put a plan in place to address potential local/State estate tax liability?
- If children from different marriages are involved in the planning, is a plan in place to guarantee that each of the children from the respective marriages will receive the inheritance intended for him or her?
- If any of the intended beneficiaries have special needs and/or are eligible for Federal and/or State assistance, is a plan in place to ensure that the distribution of assets to such beneficiaries will not cause complications and/or result in ineligibility to receive benefits?
- If a small business is in the picture, is a plan in place to ensure the appropriate transition of ownership in the event of incapacity or death and to ensure that the beneficiaries receive proper value for the business interest upon the occurrence of either of those events?
- If sizable gifts to any beneficiaries are desired, has an estate planning professional been consulted to ensure that the gifting goals are accomplished while achieving the most tax effective transfer of such property to such beneficiary(ies)?
While these questions do not uncover every possible planning need, they address the most common core issues provided for in a comprehensive estate plan.
If you’ve answered “no” to any of the questions above, you should consider consulting with an estate planning professional to ensure that proper planning is in place to meet all of your needs.
