Over the years as the tax code changed both for estates, individuals and corporations, proper planning considers not just taxes but the ultimate goals of the taxpayer, whoever that taxpayer might be.
Tax planning is part of the estate plan, but it is just a part of it. Here’s one example, as described in the article “Planning Ahead: Estate planning is not just tax planning” from the Daily Times. Wills that were drafted for people in upper tax brackets in the past, often read more like whiteboard equations in a physics class than documents about assets and what belongings should be passed to children and grandchildren. This was because federal estate exemptions were very different than they are now.
Many of those documents are no longer relevant. However, the big question, then as now, is does the estate plan achieve the goals desired?
The new tax laws have not made estate planning any easier. Estate, retirement and disability planning all must work together. It should be noted that laws and goals change, and estate plans need to be updated accordingly.
Here are some of the questions to ask:
Estate planning goes beyond drafting a simple will, or even a complex trust. Wills and trusts are personal documents. Sometimes people decide that other things are more important than taxes. That’s why a simple online form does not answer all the questions when creating a will.
An unmarried couple may decide there are more tax benefits to being married, if a state has an inheritance tax that is higher for people who are not related.
It makes the most sense to name a young person as a beneficiary of an IRA, so the asset can grow (“stretch”) over the years. However, you may have someone else in mind for the IRA.
Decision making in estate planning is not something that happens instantly, and it does change over time. That is why it is important to review an estate plan every few years.
The critical thing is to have an estate plan in place. You can adjust it as time goes by, but without one, your family faces many added difficulties and costs. Give yourself and your family the gift of an estate plan.
Reference: Daily Times (April 9, 2019) “Planning Ahead: Estate planning is not just tax planning”
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