Estate Planning: It"s About So Much More Than Taxes
Last December, President Obama signed the Tax Relief Act of 2010 (TRA 2010) into law.
Among its many provisions were several that affected the estate tax, most notably one raising the estate tax exemption to $5 million per person.
With the worry of estate taxes removed for so many people, it can be tempting to neglect estate planning altogether.
Truthfully though, estate planning is about much more than just taxes.
It's about providing financial security for your family both while you're alive and after you're gone.
Without an effective plan, your family's future is far from certain.
Your future may not be that certain, either.
Think about what would happen if you got into an accident today and suffered a head injury.
If you couldn't communicate with your doctors, access your bank accounts to pay your bills, or perform any of the myriad activities you do every day, who would step in and take over for you? Your spouse? Not necessarily - he or she might not be authorized to access your medical records or certain financial accounts.
In order to get permission to handle these basic things for you, your spouse might be in for an expensive and drawn-out court proceeding.
In the meantime, your medical preferences could go unheeded and your family's bills might go unpaid.
And what if you pass away without an estate plan? True, the state has a structure in place that will distribute your assets to your family as it sees fit, but does that structure reflect your wishes? State law has no mechanisms for placing property in trust for an adult child who might not be the best at handling his money.
Nor does it make any provisions for your assets to go to charity, to close friends, or even to be set aside for the care of a beloved pet.
With a comprehensive estate plan in place, you can make sure that your family is taken care of without court intervention in the event of your disability.
You can also make sure that your assets are distributed to those who should receive them - and in the most effective manner - when you pass away.
The estate tax provisions of TRA 2010 are only in effect through the end of next year.
After that, it's anyone's guess whose estate will become taxable.
Whether your estate is taxable or not, you should have a plan in place ensuring you and your loved ones are protected.
Among its many provisions were several that affected the estate tax, most notably one raising the estate tax exemption to $5 million per person.
With the worry of estate taxes removed for so many people, it can be tempting to neglect estate planning altogether.
Truthfully though, estate planning is about much more than just taxes.
It's about providing financial security for your family both while you're alive and after you're gone.
Without an effective plan, your family's future is far from certain.
Your future may not be that certain, either.
Think about what would happen if you got into an accident today and suffered a head injury.
If you couldn't communicate with your doctors, access your bank accounts to pay your bills, or perform any of the myriad activities you do every day, who would step in and take over for you? Your spouse? Not necessarily - he or she might not be authorized to access your medical records or certain financial accounts.
In order to get permission to handle these basic things for you, your spouse might be in for an expensive and drawn-out court proceeding.
In the meantime, your medical preferences could go unheeded and your family's bills might go unpaid.
And what if you pass away without an estate plan? True, the state has a structure in place that will distribute your assets to your family as it sees fit, but does that structure reflect your wishes? State law has no mechanisms for placing property in trust for an adult child who might not be the best at handling his money.
Nor does it make any provisions for your assets to go to charity, to close friends, or even to be set aside for the care of a beloved pet.
With a comprehensive estate plan in place, you can make sure that your family is taken care of without court intervention in the event of your disability.
You can also make sure that your assets are distributed to those who should receive them - and in the most effective manner - when you pass away.
The estate tax provisions of TRA 2010 are only in effect through the end of next year.
After that, it's anyone's guess whose estate will become taxable.
Whether your estate is taxable or not, you should have a plan in place ensuring you and your loved ones are protected.
