With proposals to repeal the estate and generation-skipping transfer taxes included in recent tax reform discussions, many may wonder whether estate planning is still necessary. Although a carefully structured plan may help reduce the burden of estate taxes, estate planning is more than just tax planning. In light of National Estate Planning Awareness Week, it’s as important as ever to understand the need for an estate plan that meets both tax and nontax objectives.
Decide on a Legacy
When creating an estate plan, individuals should reflect on their goals for their financial legacy, including how they wish their assets to be handled—and ultimately distributed—at their deaths. For some, this may mean long-term education planning for future generations, while others may seek to include charitable gifts in their planning. There are no wrong answers, and experienced advisors can assist clients with thinking through the effects of their decisions. Once the legacy has been identified, an overall estate plan will be created to help reduce the administrative burden and taxes at death. It’s important to note a comprehensive estate plan often will contain lifetime strategies such as gifting and a revocable trust.
Mistakes to Avoid
Many believe only those with significant or complex assets need an estate plan. However, estate planning is critical for those with assets of nearly any size—and certainly for anyone with children. In fact, starting the process as soon as assets begin accumulating can help with creating a long-term, coordinated planning process. Estate planning is a flexible process, so be sure to get started sooner rather than later.
It’s important to understand how one’s estate plan will be implemented at death, given the specific circumstances. The titling of assets or apportionment of expenses or taxes can create surprises if not properly planned for, particularly when multiple classes of beneficiaries are involved.
Don’t Create It & Forget It
Once an estate plan has been created, it’s important to follow through on implementation and regularly review the plan with advisors to assess whether the initial goals and objectives are still being met. For example, if a revocable trust is created with the intention of avoiding the probate process, assets that aren’t retitled may still be subject to probate. Of course, life events such as marriage, divorce or a child’s birth also may necessitate a review of the estate plan, as would a significant income change or relocation to a new state of residence. Estate planning may be considered a living process, evolving as needed to best fit an individual’s specific needs and circumstances.
We often see headlines about celebrity estate planning mistakes, but they don’t just happen to the rich and famous. Work with a trusted advisor who can help navigate the plan’s creation and continued oversight. By aligning yourself with professionals, you can avoid pitfalls and have peace of mind knowing your estate plan is in place.
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BKD Family Office is an SEC-registered investment advisor offering wealth management services for affluent families and is a wholly owned subsidiary of BKD, LLP, a national CPA and advisory firm. A copy of BKD Family Office’s current written disclosure statement is available upon request. Accounting, tax and related solutions are provided by BKD, LLP.