4 Steps To An Effective Estate Plan

Posted by: Brookside Admin

You don't have to be a multi-millionaire to need an effective estate plan. The point of an estate plan is to ensure that your assets are delivered to the right parties and to help limit the tax liabilities of your beneficiaries. Forbes recently put together a helpful list of tips to accomplish both of these objectives. Here's what you should know about estate planning. 

  • Assign beneficiaries

Your first concern is to decide who will be your beneficiaries. Then, you'll need to decide who gets what of your assets. Without this crucial first step, the law will split up your assets accordingly, which includes non-financial assets like antiques and heirlooms. You'll want to be clear and complete in assigning beneficiary designations and ensuring that all your valued assets are given an individual to inherit them. 

  • Establish trusts

Particularly if you have young beneficiaries, or anticipate having large debts for your family to cover, you'll want to establish trusts. These will help dictate how and when inherited money can be spent. This way, you can set aside money that must be spent to cover your lingering debts. Or ensure that money is used for college tuition, instead of spent well before that. Beneficiaries can be set to receive the assets at a specific date or age and be legally bound to use the money in the way you intended. 

  • Minimize taxes

In many cases, your beneficiaries will owe significant taxes, both estate and income, after their inheritance. There are certain strategies that can help minimize the taxes owed by your beneficiaries, however. For instance, you'll likely have tax-free assets like the money in a Roth retirement account. This money can be left to your family without incurring additional tax bills. Meanwhile, other assets can be left to charity. You can also begin gifting assets to your beneficiaries while you're still alive. There are specific tax laws about gifts, but generally if it's a one-time gift valued at less than $13-thousand, it's tax free. You can also use your life insurance benefits to off-set any taxes owed by beneficiaries. Life insurance proceeds are tax free. 

  • Work with professionals

Creating an effective and complete estate plan typically requires professionals. When establishing trusts and wills, you need to ensure that federal and state requirements are met. Tax professionals can help to estimate the amount of taxes that will be owed by beneficiaries and help you find ways to minimize those taxes. You'll also want to enlist the help of someone who can guide you to the proper investment and savings accounts and who understands how those accounts will be affected when given to your beneficiaries. 

At Brown Kinion and Company, we offer a full range of services for estate planning. We'll help you define your goals for your estate, prepare and organize important documents, lessen tax burdens and much more. Call us to get started.