I’ve heard estate planning is mainly about avoiding taxes and I don’t have a large enough estate to worry about that. Do I still need an estate plan?
Estate plans are more than just about tax minimization but such tax planning can be an integral part of this process. Estate planning involves the coordination of diverse assets into a coherent whole so that the family gets the assets as intended, in appropriate shares, time and manner. Estate planning involves taking into account assets that are held jointly, or payable on death or transferred by beneficiary designations. These assets are not controlled by a will and are sometimes referred to as will substitues. Examples are life insurance, retirement plan accounts, annuities, joint tenancies, payable on death accounts, etc. Estate planning is geared toward integrating all of these diverse assets into a comprehensive program that will actually work in operation.
Additionally, trusts for special family situations, durable power of attorney and living wills are also required documentation to protect the family.
For more on how this all works and the issues involved please read my article entitled Estate Planning Mistakes: 5 Not So Easy Pieces
It’s true that under present law, most people do not have enough assets to worry about estate taxes. Estate taxes only apply to estates valued at more than $2,000,000 in 2006 (including life insurance and retirement accounts). While avoiding taxes is certainly a goal for many of our clients with significant assets, there are numerous other goals that a comprehensive estate plan can meet: making sure the people you choose inherit your assets, naming a person to make medical decisions for you if you become disabled, naming an agent to manage your property if you become disabled, deciding who should care for your children if you pass away before they’re old enough to care for themselves and their money, and deciding under what conditions in a final illness you would want artificial life-support discontinued.
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