Managing assets into the future

Ensure you have an estate plan for your heirs

Proper estate planning is essential to ensure your affairs are handled and your assets are distributed according to your wishes. If you die without a will, your assets will be distributed according to the intestacy statutes of the state in which you live at your death. Poor planning  can have unforeseen  consequences for your surviving heirs. Even a simple will can alleviate a lot of problems. Still, depending on the size and composition of your estate, there may be several aspects of your plan that need to be managed to ensure it complies with both your intentions and the law.

That is not to say that estate planning must be complicated, nor does it say that it’s only for the wealthy. Anyone with assets such as a home, savings account or a business, and who wants to  preserve the estate for the benefit of surviving heirs, should have a plan for managing their estate affairs. For most estates, a few straightforward arrangements can be made with minimal expense. An attorney may need to be consulted if the estate is large, if there is a need for trusts — such as for minor children,  or if there are complicated arrangements involving family members.

To effectively manage your estate planning, there are four areas you need to address:

1. Transferring your assets after your death
2. Minimizing your estate costs
3. Taking care of loved ones, and
4. Managing your affairs during incapacity, when you no longer can.

 

Transferring your assets

The first consideration for managing your estate plan is to ensure that your assets are passed to your heirs as efficiently as possible. Here are two tools with which to accomplish this: 

A will – A will is a legal document communicating your intentions for asset distribution, guardianship of minors and who is to manage your estate as the executor. Without a will, state statutes may decide how your assets are distributed and a court will decide who will be the guardian of your children.

 Living trust – Besides a will, you can establish a living trust, name a trustee and then transfer your assets to the trust. The trustee will manage the assets for the benefit of the trust’s beneficiaries. Housing your assets in a living trust prevents them from being subject to probate proceedings, allowing them to pass directly to the beneficiaries.

 

Minimizing your estate settlement costs

The settlement of any estate typically incurs certain expenses, including probate fees, legal costs and state or federal taxes. Properly planned and managed, your estate can be arranged to minimize these costs.

Avoiding probate – With a trust, assets can be transferred to beneficiaries outside of probate. A living trust is the most straightforward and less costly trust to use for this. Also, be aware that any asset that transfers by contract through a beneficiary designation, such as annuities, life insurance and retirement plans, will pass directly to the named beneficiaries. 

Avoiding estate taxes – The estate tax exemption amount in 2023 is $12.92 million per person.  If you have significant amounts of wealth such that you need estate tax planning, there are several techniques and arrangements that can be applied to reduce your assets’ exposure to the estate tax: 

• Marital deduction – Each spouse can gift an unlimited amount of their portion of the estate to the other.
• Lifetime gifts – By making qualified lifetime gifts of up to $16,000 to family members each year, you can reduce the size of your taxable estate. 
• Charitable gifts – Gifts of assets made to charity during your lifetime or from the estate are also excludable from the estate.

 

Taking care of loved ones

A critical aspect of managing your estate plan is ensuring your loved ones have the financial security they need.

• Life insurance can provide the estate plan with the liquidity your surviving family needs to pay funeral expenses, estate settlement costs and the family’s capital needs during the transition.
• Guardianship arrangements must be made for minors and family members with special needs.
• Professional management – If the estate includes investments such as stock portfolios or income properties, it may require a professional manager or trustee to maintain them for the benefit of the family.

 

Taking care of you when you no longer can

The changing reality of medical advances, resulting in living through critical illness and other incapacitation, has created a whole new level of planning needs. Failure to plan for incapacity can result in devastating financial consequences for the family. The  time to manage this critical aspect of your estate plan is when you are young and healthy.

Medical directive – A living will directs providers to make certain medical decisions for you when you cannot. 

Medical and Financial Durable power of attorney – These legal documents authorize a person to make critical financial and medical decisions should they become incapacitated. 

 

Summary

Managing an estate plan is about more than just making final financial and medical arrangements. Because your financial and family situations constantly evolve, it’s a lifelong process incorporating changing circumstances, preferences and desires. Keeping your estate plan current is just as vital as managing your current financial plan. Working with a qualified estate planning specialist can save your estate considerable money, and your family a lot of extra grief.

If you’re looking for wealth management and estate or trust consultation, consider Alpine Bank Wealth Management.

 

 

Products of our Wealth Management service are not FDIC insured, may lose value and are not bank guaranteed.

• June 16, 2023
• Financial
• Alpine Bank Staff

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