Why We Need Estate Plans? Money Talks News’ recent article entitled “Why Everyone Needs an Estate Plan” reminds us that these plans aren’t just for the wealthy. People of all ages and income levels can benefit from drafting one. An estate plan provides instructions about how your assets will be distributed, as well as how you’ll pay for your debts, final arrangements and even your medical care if you become incapacitated.
With everything stated explicitly in an estate plan, your family can work through their grief after your death instead of battling each other about who gets what.
An estate plan describes your wishes regarding how assets such as your house, vehicle bank accounts, investments and valuables will be transferred to your beneficiaries after you die. Most of this is included in your will. You’ll also name the executor in your will, as well as a guardian for your minor children, and even someone to take care of your pets when you’re no longer here.
Many people will confuse an estate plan with a will. However, that’s just a part of a comprehensive plan. There is much more involved than just who gets what after you die. It can also include your wishes, if you’re medically unable to manage your own affairs. Your plan can designate your durable power of attorney (DPA), who can make medical and financial decisions in your stead, along with medical directives on what medical procedures you do or don’t want to prolong your life.
One of the most compelling reasons to have an estate plan is that it can help avoid probate and prevent your family from winding up in court to access the assets you’ve left behind for them. Another reason to have one is to help reduce the taxes imposed when your assets are transferred to your beneficiaries.
Federal estate taxes typically only apply to the very wealthy. In 2022, the threshold, or estate tax exemption, is $12.06 million, for 2023 that number is $12.93 million.
Unless your assets are valued over the applicable exemption in the year of death, you’re exempt from federal estate taxes. However, while you may be exempt from federal-level estate taxes, the state you live in may impose its own taxes. Some states also levy inheritance taxes on beneficiaries who inherit assets from you.
Check with an experienced estate planning attorney in your area.
Reference: Money Talks News (Oct. 21, 2022) “Why Everyone Needs an Estate Plan”
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