Brian Fraser, an attorney at Carrell Blanton Ferris’ Williamsburg, Virginia, office conducts seminars on estate planning. He has heard many success and failure stories regarding those who plan and those who don’t. And while most people realize estate planning is important, they put it off. After all, picturing a time when the world rolls on without us is not likely to be a favorite subject.
But not making a plan leads to problems. He offers the following considerations.
Put Yourself First
You are at the center of estate planning: your life, possessions and the values and legacy you aim to pass on. The more you plan and clarify your wishes, the easier you make things for your heirs.
“Everyone deals with some of the same issues as we age. We worry about our kids, our grandkids, how we’ll take care of ourself and our spouse, but our goals within those general ideas can be very different,” says Fraser, who recommends meeting with an estate planner to sort these things out.
In addition to having a will, you should plan for potential end of life problems. “Sometimes they’re so focused on the death aspect of planning they never consider what could happen if they became disabled,” Fraser says. Designating an agent to make decisions for you can preempt putting your loved ones through a court proceeding.
Your Heirs
You probably know whom you want to leave your possessions to, but how you leave assets can be almost as important. If you’re leaving money to a child or grandchild, that money could be fully accessible when the child turns 18. “When you point that out [to] those planning their estates,” says Fraser, “They say, ‘No, that’s not what I meant to do. I never met an 18 year old who can handle that kind of money.’”
You also have to be careful leaving money to family members or friends with special needs who are on Medicaid or SSI. “The assets you leave behind could bump them off benefits,” says Fraser.
Your Legacy
Planning your estate is the perfect time to revisit your values and contemplate intangibles. In addition to legal documents, many people like to write letters or make videos sharing their wisdom and perspective with grandkids or future generations. “These are the things we find of great value in life,” Fraser says, “what we want to leave our kids even more than money, more than a house.”
He recently worked with a married couple, both professors. Their children were doing well professionally and had plenty of money, so the couple decided to pass on the value of education to future generations. They opened a trust to pay for post-secondary education for their descendants. Depending on number of future grandkids and great-grandkids, and education costs, their trust might fund five or six generations.
Taxes
Estate planning is about more than taxes, but taxes are important to consider. Research the estate tax in your state, and the potential income task burden you may place on your heirs.
The amount of tax exemptions varies from state to state. Virginia has no state death or estate tax, says Fraser. But you’ll still have to factor in federal taxes. The current exemption amount is 5.34 million, or 10.68 million for a married couple.