My Parents Didn’t Have an Estate Plan, Why Do I Need One?

No two people are the same, meaning no two estate plans will look the same, either. But when it comes to making your own, it’s natural to compare your needs with others. You may find yourself thinking:

  • “Our dad didn’t have a trust, so why would I need one?”
  • “My best friend’s mom got by with just a will, and everything turned out fine.”
  • “My grandma’s estate didn’t need to go to probate court, so why should I worry about it?”

The reality is your estate plan should reflect your individual needs—not others’. Remember, there are three core planning elements to keep in mind when establishing a tailored estate plan: honoring intent, maximizing efficiency, and minimizing taxes.

So, why are we saying you could benefit from a custom estate plan when others before you have skated by without one? Great question; let’s discuss.

You Might Not Realize How Much You Actually Have

One of the biggest reasons people don’t create estate plans is because they’re under the impression they don’t have or make enough to warrant one. But for most, that’s an oversimplification.

If you’re still doubtful about your need for an estate plan, make a list that includes the following:

  • Assets you own: Houses, cars, a business, boats, art, or other collectibles.
  • Your investments: Retirement accounts, brokerage accounts, real estate investment trusts, etc.
  • Life Insurance: This is often overlooked.
  • Any other income: Savings account, bank accounts, annuities, insurance policies, etc.

Once you get a clear picture of what you have, it may be easier to understand the benefits of a custom estate plan.

Estate Plans Aren’t As Simple As You Think

Just because your intent is simple doesn’t mean your estate plan will be simple.

Most people want to keep things easy from a distribution standpoint. For example, if you die first, the assets go to your surviving spouse before being split evenly among your children.

This is a relatively straightforward request, but the process of actually getting those assets to the right people efficiently may not be as easy as you might assume.

Why? 

Because there are several ways to achieve your distribution goals. Working with an estate planning attorney, tax professional, and financial professional is critical during the estate planning process. They’ll help review your options and find an appropriate path forward to help you meet your needs.

As you get started, ask yourself some questions like:

  • How can I make the process efficient and streamlined for my family?
  • How can I minimize the overall tax impact of the wealth transfer process?
  • Does using a trust to put parameters on an inheritance make sense?
  • Should I try to side-step probate as much as possible?

How you answer these questions can serve as a springboard for your estate plan.

Three Core Estate Planning Principles to Evaluate

Remember, your estate plan often hinges on three driving tenets: intent, assets, and circumstances.

Understanding each helps your estate planning attorney determine the type of wealth transfer vehicles that could be best for you, like a trust, beneficiary designations, joint ownership, etc. The combination of your intent, assets, and circumstances tends to dictate the extent to which you need to include the tools in your plan.

#1: Intent

As mentioned, your intent could be simple. Even so, it’s important to put your final wishes in writing. Will everything go to your spouse, or do you want to donate a portion of your assets to charity? If you have a blended family, will all children receive an equal share of your estate? 

Essentially, you must decide what you want to happen to your assets after your passing. To take it a step further, consider why your chosen action is important to you.

#2: Assets

Next, consider the assets themselves. What do you have in your possession, and how would you like each one accounted for in your estate plan? For example, you likely won’t handle the transfer of an IRA the same way you’ll manage a life insurance policy.

It can be helpful to divide your assets into two categories: easy money and hard money.

Easy money: This refers to assets with little or no tax consequences during the transfer process. Examples include real estate, savings accounts, and life insurance policies.

Hard money: These assets will likely have tax consequences when distributed after your passing. Examples of hard money include IRAs, annuities, and 401(ks).

In general, easy money may be most easily transferred through joint ownership or naming a trust as the beneficiary. On the other hand, hard assets tend to benefit from naming direct beneficiaries (like a spouse or child).

#3: Circumstances

Your estate plan should reflect your unique circumstances. Common examples of things that impact your final intent include the relationship you have with your children or step-children, if there’s a charity you’re passionate about, or if your grandchildren are under 18, etc.

This is why it’s imperative not to create an estate plan based on what you’ve seen others do in the past. Everyone’s unique, and to operate efficiently, your plan must reflect your final wishes.

Why Developing a Relationship With a Trusted Professional Can Help

All of this to say, estate planning isn’t necessarily an intuitive process. It’s hard to get all the information you need to make an informed decision, and that can cause anxiety for loved ones left behind.

At Legacy Wealth, we’re always here to serve as a resource for you and your surviving family. We understand the importance of having a trusted professional to prevent anxiety at a time when your family is already emotionally and financially overwhelmed. 

Wherever you are in the estate planning process, please don’t hesitate to give us a call. We can connect you with an estate planning attorney who can review your current state of affairs and provide tailored guidance.

Disclaimer

Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted.

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication or future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

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My Loved One’s Assets Are Going To Probate, Now What?

If you’ve perused the internet for estate planning articles, you’ve likely come across the term “probate.” Chances are, it probably wasn’t painted in the most flattering light.

Probate court has cultivated a somewhat negative reputation over the years. But when a loved one passes away, that may be where their assets end up. If that’s the case, try not to panic, and don’t believe everything you read online regarding the probate process. 

Here’s what we believe you need to know about this legal system and how it impacts your loved one’s assets.

What Is Probate?

Probate is a legal process used to “validate” your estate. It’s an administrative process dividing your assets as legally required and distributing them to the appropriate parties. 

For example, the probate court may evaluate your will and create a process to implement your final wishes as written. They will legally recognize your chosen executor, guardians, trustees, and heirs.

Probate court can also help remove loved ones’ names from property if needed. This situation can be common if the deceased hasn’t named beneficiaries, assigned joint ownership, or instructed that certain assets be payable to a trust. If that’s the case, the estate must go to probate to legally change ownership.

3 Probate Myths To Unlearn

There are several misconceptions about the probate process. While many families wish to structure their estate to minimize court involvement, a loved one’s estate may need to go through probate. Here’s what you need to know if that happens.

Myth #1: Will’s Must Always Go Through Probate

Yes, in most cases, your will must go through probate. But there are occasions where your estate can bypass probate, even when you have a will. 

Let’s look at an example. 

Remember, you have several estate planning tools at your disposal to help you carry out your wishes—a trust, beneficiary designations, joint ownership, etc. When applied appropriately, these tools may avoid probate. 

If you leverage tools like establishing beneficiaries on retirement accounts and insurance policies and making your executor a joint owner on bank accounts, your estate may not need to go through probate even if you have a will. 

In a case like this, the will’s primary function is to reconfirm your wishes that other tools, like beneficiary designations, help carry out. 

Myth #2: Probate Drags On For Years and Years

It’s a common misconception that the probate process always takes a long time to complete. But the only mandated delay is the period creditors have to file claims, which varies by state. 

Once that period ends, it’s up to the state’s executor to pay all debts, taxes, and gather assets for distribution. In many cases, people complete the probate process in under a year.

However, there are times when probate drags on. But this primarily occurs when family members challenge the will, if the estate is extensive and exceeds the federal estate tax exemption limit, or if the estate continues to receive income after a person’s passing (such as royalties or licensing agreements).

Myth #3: Probate Creates Contention

Going through probate doesn’t automatically mean you’ll go through a worst-case scenario. Too often, people think that the state will seize their assets, take the house, drain their bank accounts, or cause familial disagreements. 

But the probate process isn’t out to get you. It’s simply one way to execute an administrative process for assets after someone passes. 

Think about it this way. Your loved one could have a 1,000-page trust to avoid probate. Yet, the presence of that document doesn’t mean family members still won’t fight over who gets what. If there’s tension regarding a loved one’s estate, it doesn’t matter what legal process it goes through—family riffs can occur no matter what.

An effective way to diffuse tension amongst family members is by being honest and transparent during the estate planning process. Doing so can help family members understand and talk through the reasoning behind their decisions and give others time to process.

However, Probate Court Could Introduce Certain Inefficiencies

All of this is not to say that probate can’t be a pain. It can create some inefficiencies, involve the court, and incur unnecessary costs and delays.

Because the process tends to be paperwork heavy, it’s often on the executor, surviving family members, and legal team to provide all necessary documents and pay the fee to open everything up. After an initial 30- to 60-day process, expect probate to take between six months and a year.

In most cases, as soon as probate is open, you can start liquidating assets. You can’t, however, begin making distributions.

Here’s an example:

Say your loved one dies, and you want to sell the family house. You put it on the market and settle on an attractive offer. You then contact the estate planning attorney with the offer in hand. If there are no underlying issues, you can likely sell the house. However, you won’t be able to make distributions until you close probate, which, again, could take about a year.

Why Your Will Plays a Bigger Role Than You Might Think

While a will may not be your or your loved one’s only estate planning tool, it can play an important part in the wealth transfer process. A will indicates who is in charge of the estate and dependents after a person’s passing. You can use it to name an executor, guardian, trustee, and other essential roles.

Without a will, it’s up to the courts to decide how to distribute your estate based on local law. While this may work out fine in some cases, it doesn’t guarantee that the outcome will reflect your original intent. 

Your will lets everyone know and understand your intent for your estate.

If you have a question about your loved one’s will or the probate process, don’t hesitate to reach out. We’d be happy to connect you with an estate planning attorney who can help you create a personalized wealth transfer plan. 

Disclaimer:

Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted.

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication or future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

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What’s The Difference Between a Will and a Trust?

While sitting down with your spouse to prepare your estate plan, you’ll likely talk about two fundamental documents: a will and a trust. 

But before you get lost in a sea of internet search queries about which is right for you, let’s take a step back and help you create a strong foundation that may reveal your needs and clarify the answer.

Today, we’ll tackle the following:

  • The importance of building a tailored estate plan
  • How a will and/or trust could fit into that larger plan
  • Common misconceptions about wills and trusts and what to know instead

Put Your Plan Before The Documents

Your estate plan is just that—a plan. It’s a comprehensive, coordinated strategy that extends your wishes and legacy to the next generation (and beyond). 

Different documents, like a will and a trust, are simply tools to help express your plan optimally. How will you know what that means? We talk about sticking with these three core estate planning concepts:

  • Honor intent
  • Maximize efficiency
  • Minimize taxes

When you understand your intent, your estate planning attorney can help you leverage the appropriate documents to carry that plan out. 

While nearly everyone can benefit from a tailored estate plan, people don’t necessarily need every estate planning document available. 

Think about this concept like building a house. You probably wouldn’t use super glue to attach new roof shingles, but that doesn’t make super glue invaluable. In fact, it will probably come in handy when you’re unloading and accidentally ding a vase or other breakable item, far more than cap nails would. 

As with a house, there’s no magic wand you can wave to create an estate plan that works for you. Wills and trusts have their places in different people’s plans for various reasons. 

When it comes down to it, wills and trusts are simply documents and tools that help support your plan. Deciding which documents to use without context is like putting the cart before the horse—it can throw your plan off balance. 

So how will you know if a will or trust is the right vehicle to support your estate plan? You’ll start by determining what you want the administrative process to look like. 

Let’s dig into that a bit more below. 

Basic Mechanics Of Wills and Trusts

There’s a reason that wills and trusts are the most widely discussed estate planning topics—they have a core concept in common: 

Both a will and a trust allow you to express your intent. 

Since honoring your intent is often priority number one on people’s estate planning wish list, leveraging these tools effectively is a big deal. 

The difference between the two lies in how that intent is processed. 

If you’ve searched for information about wills and trusts before, you’ve likely come across this statement: wills go through probate, and trusts avoid probate. At this point, your mind might be racing with questions like:

  • My loved one had a will and didn’t need to go to probate, so why would I?
  • Is a trust the only way to avoid probate?
  • Do I have enough money to justify establishing a trust? 

Don’t worry; that’s hardly the end of the story.

Let’s bring some much-needed context to clear up these common misconceptions about using wills and trusts in estate planning.

Can You Use A Will And Avoid Probate?

Depending on the tools you use to support your intent, yes! 

Remember, your will is a document that enables you to express your intent regarding your assets after you pass. But you could leverage other vehicles to help facilitate the wealth transfer process, like beneficiary designations, joint ownership, deeds, and more.

When you use them appropriately, those designations avoid probate. So you could have a will that states you want to split your estate evenly among your children and use beneficiary designations and other tools to actually carry that wish out. 

Think about it like this: if a will is a map, the other vehicles are the car, streamlining your assets from point A to point B. 

Avoiding Probate With A Will and Other Documents: A Case Study

Here’s an example to put this idea in perspective. 

Bob and Carol Branch recently retired and are considering a formal estate plan. They’ve worked hard and accumulated the following assets: a house in Michigan, two retirement accounts, and a life insurance policy. 

Each of their three children gets along well, and the Branch’s want to split their assets evenly among their kids. This is one example of what they could do. 

  • Create a will that states the intent to distribute their entire estate evenly.
  • Put a ladybird deed on the house that has the house go to their three kids when they pass.
  • Name spouses as primary beneficiaries and each child as contingent beneficiaries on the retirement accounts and life insurance policy.

As you can see, this family isn’t using their will as their Plan A. Instead, it’s a vessel for communicating and validating their intent while other tools run in the background. 

Given this family’s relatively straightforward intent and assets, a will accompanied by these other tools makes sense and keeps their assets out of probate court. 

Do I Need A Certain Amount of Money To Use A Trust?

Perhaps the most prevailing misconception about trusts is that you need to have a certain net worth to make the most of it. 

But trusts and net worth aren’t one and the same. 

When deciding if a trust makes sense for you, consider this question:

Do you want to impose a separate administrative process for dividing your assets?

Trusts can be effective ways to bring additional structure and organization to the wealth transfer process. In several cases, the families that benefit from trusts are the ones who have specific hows, whens, or whys regarding their estate. 

Perhaps your children don’t get along, and you want more structure for paying bills and settling the estate tab before they get their share of the inheritance. In that case, you could allocate some assets (learn which assets make sense to put in a trust here) to go to the trust after you pass. Your trustee would use that money in the trust to pay for things like funeral costs, debts, taxes, etc., and then split the remaining balance per the trust’s terms. 

Let’s bring the Branch family back for a new example. 

Trusts Enable You To Set A Process: A Case Study

Welcome back, Bob and Carol Branch. Remember their three kids? In this scenario, they aren’t on friendly terms, and two of them can be rather careless about their finances. 

They still want to split their assets evenly. But, given the circumstances, Bob and Carol don’t believe that the children could achieve a fair, equitable, and fight-free split by inheriting the assets outright, so they’re looking into establishing a trust.

Assuming they have the same assets from above, here’s one example of what they could do differently. 

First, they could have the house and life insurance policy paid to the trust upon their deaths. Doing so avoids probate and brings more structure to the ongoing expenses. They could have the trust pay for things like the property tax, maintenance, upkeep, and more on the home without relying on the kids to split the payments among themselves. 

They may also decide to keep their three kids as primary beneficiaries on their retirement accounts, so that money would bypass probate outside the trust and go directly to the heirs. 

So while trusts may be advantageous when you have a more complex financial situation, they are also super beneficial for those with more complicated family dynamics. 

Remember, Keep Your Plan In Charge

It’s important to establish a strategy where your plan determines the administrative process, not the other way around.

When you understand your plan and your intent, your estate planning attorney can help you determine creative solutions that meet your needs. 

Wills and trusts are two estate planning documents that can validate your final wishes, but which you use depends on your intent, assets, family dynamics, and more. We’re proud to collaborate with an estate planning firm that can help you determine your needs and devise a plan. 

If you want to learn more about if a will or trust can best suit you, set up a call with us, and we can connect you with a law firm. 

Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted.

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication or future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

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Who Should Be In Charge Of Your Children’s Money If You Pass?

A parent’s worst nightmare is leaving their children too soon. That makes planning for the unexpected an undeniably challenging task many don’t want to confront.

It’s our hope, however, that taking the time to build a plan now will help to protect your children in the unlikely event of your early passing. Facing these decisions while you’re still able to put you in control of how your children are to be cared for—rather than leaving difficult choices in the hands of a court. 

Alongside a child’s care and schooling, parents should also consider how they’d like to structure the inheritance piece of the plan. Below we share a few key considerations to make when addressing these concerns.

Understanding Their Inheritance

Do you know how much your child stands to inherit? This is a good opportunity to take stock of your assets and how much they’re worth, including,

  • IRAs, 401(k)s, and other savings accounts
  • 529 plans
  • Properties
  • Collectibles
  • Brokerage accounts

Once you have a good idea of what you have, decide how much you’ll leave to your kids. Is everything going to your children, or do you want a portion of your estate divided amongst other family members, friends, or charity?

Should You Keep Things Equal?

If you have multiple children, consider how much each child will inherit. Choosing to divvy everything up equally is perfectly fine. But some family dynamics are complex, and giving equally to every child might not always be the right decision. For example, parents in blended families sometimes choose to leave different amounts to children brought in from previous marriages. 

Take some time to consider your options and what will, ultimately, be the right choice for your children and their future.

Consider the Actual Value of Your Assets

Don’t forget, not all assets carry the same value. Depending on tax liabilities or the potential for appreciation, some things might be worth more than others by the time your child has access to them.

A financial advisor or tax professional can help you sort through the estimated value of assets once your children inherit them—as this may differ from their current face value.

Consider the Timeline

Next, decide at what point your children can control the funds. Should a child have full access to a $1 million inheritance the day they turn 18? Some parents may not be comfortable granting their children a large sum of money without any direction or supervision.

Instead, there are things you can do to help bring structure to the wealth transfer process. A trust, for example, allows you to set parameters that throttle the inheritance. 

Instead of receiving $1 million on their 18th birthday, perhaps your child receives $100,000 right away to cover college tuition and living expenses. From there, they receive 25 percent of their inheritance every five years or so. This might be an effective way to support your child financially while encouraging them to be responsible stewards of their wealth.

If you aren’t interested in creating a trust now, you can request in your will for a trust to be established after your passing. Again, this trust would state the terms and parameters for scheduling distributions of your estate to your children.

While we’ve given just a few examples of what you can do, this is a meaningful conversation to have with your significant other and your financial or legal team. They can help determine what’s going to be the best course of action for preserving wealth while caring financially for your children.

Select the Right Conservator for Your Family

Who in your family do you consider to be good with money? In other words, who do you trust to manage your assets after your passing?

Consider asking a like-minded family member with similar values to serve as conservator. Think about how they’ll handle certain situations compared to how you and your spouse would. 

If you’re an avid saver who rarely splurges, you’ll likely be more comfortable putting your child’s inheritance under the leadership of someone with a similar mindset. Once you know who that person is, put it in your will.

No matter who you choose to serve as conservator, write down your final wishes with explicit instructions on how you want your children to be raised and their money managed. Make sure the person you choose is willing to work with the right people, like a financial advisor, tax professional, or attorney, to manage your money responsibly. 

Get Professional Guidance With Legacy Wealth Advisors

Designing a plan for your children after your passing is a tricky situation. We always recommend working with a team of professionals who can help properly document your wishes and use the most effective vehicles to make them happen.

At Legacy Wealth Advisors, we help parents of young children develop a legacy plan that honors their intent, maximizes efficiency, and minimizes taxes. As you focus on raising your family, let us know how we can help. Feel free to reach out anytime to get started.

Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted.

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication or future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

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Why You Should Give More Cash While Alive, Instead Of Leaving It In Your Estate

Many families commonly aim to leave a meaningful inheritance for loved ones. But have you considered giving away more of your money and assets during your lifetime?

The trend of giving while living is taking over, and there are plenty of strong reasons why.

From seeing your legacy in action to managing tax liabilities, here’s how giving now can be an excellent gift for everyone involved.

The Basics of Gifting

Some retirees are wary of gifting to loved ones because of the tax implications. But thanks to the Tax Cuts and Jobs Acts of 2017, the estate tax exemption is at an all-time high. With these changes, you can give away a lot of money before the federal government intervenes.

For 2022, the federal estate tax exemption is $12.06 million for individuals and $24.12 million for married couples.1 Unless further legislative changes are made, this larger exemption is set to sunset in 2026, where it will likely lower to $6 million.

This estate exemption is cumulative over your lifetime, and you can give to as many recipients as you’d like.

How Does the Gift Tax Work?

The IRS also imposes a gift tax, with a 2022 exemption limit of $16,000 for individuals or $32,000 for married couples. If your gifting exceeds this amount in a calendar year, you must report it. The amount you report goes toward your $12.06 million estate exemption limit.

Whoever is receiving your gift isn’t required to report it on their taxes, and adding to your exemption “tab” will likely mean that you are not required to pay taxes on it either–as long as you are under the $12.06 million threshold.

What About State Taxes?

Remember, this $12.06 million exemption is for federal estate taxes only. If you live in a state with its own estate tax, you still may be liable for taxes on gifting.

As of 2022, the states that impose an estate tax include:2

  • Connecticut
  • Hawaii
  • Illinois
  • Maine
  • Massachusetts
  • Minnesota
  • New York
  • Oregon
  • Rhode Island
  • Vermont
  • Washington
  • Washington, D.C. 

Luckily, Michigan isn’t on this list!

3 Reasons to Consider Giving Before Your Passing

Without the weight of taxes on your shoulders, you are in a position to give more freely to your loved ones. Here are three reasons why giving while you’re still living can enhance your legacy.

Reason #1: See The Impact Of Your Gift

Most think of estate planning as preparing a legacy after their passing. And while you can still give when you’re gone, you lose out on the joy of seeing your loved ones put your gifts to good use.

Rather than having a lump sum sitting in a bank, you may find it more gratifying to watch your savings in action. Imagine a grandchild walking across the stage at graduation, grinning ear-to-ear knowing they’re debt-free because of you. Or the look on your niece’s face when she realizes she can afford a downpayment on her first house.

There are so many ways your money can make an impact today. And don’t forget, the same goes for your charitable giving. If you’re passionate about a cause, there’s no reason to wait to donate, especially if they could use the immediate financial support.

Reason #2: Help Loved Ones Save on Taxes

Always remember the three core estate planning elements: honor your intent, maximize efficiency, and minimize taxes.

Giving away money now reduces the value of your estate, which may limit estate or inheritance tax liabilities later down the line. With such high exemption rates in 2022, this may not be of concern. But in less than five years, that rate will slice in half (unless further legislation is passed).

Give to Charity

When making a charitable donation, neither you nor the non-profit pay taxes on the gift. If you choose to donate something like an appreciated security, this can be especially tax savvy. It reduces your tax liability and gives an organization you care about an even larger gift.

Give to Family

For the most part, your loved ones won’t pay taxes on the cash or gifts you give them. However, some assets, such as an IRA, will require the beneficiary to pay taxes on distributions. If you’re looking to gift different accounts to loved ones, we recommend working with a financial professional to review potential tax obligations.

Reason #3: Feel Fulfilled

When you give your time and resources meaningfully, you tend to feel more fulfilled. Doing good by others is a great way to bring enjoyment to your retirement, especially when it’s helping loved ones achieve their own milestones or goals. 

Giving money to family, friends, and charities while you’re still alive makes the most of your money and creates a legacy you can be proud of.

Give Generously

As you move through the estate planning process, consider gifting while still being around to enjoy it. Our team at Legacy Wealth works closely with those in or nearing retirement to prepare meaningful estate plans.

If this is something you’re in the process of doing or have questions about getting started, feel free to reach out to us anytime.

Sources:

1Estate Tax

217 States With Estate or Inheritance Taxes

Disclaimer: 

Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted.

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication or future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

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What Assets Should You Put In Your Trust (And Which To Leave Out)

Trusts are a beneficial estate planning tool. Yet many families think that trusts are only for those with an ultra-high net worth—fancy hotels, fast cars, and glamorous trip types. 

The truth is, a trust can be helpful for people who wish to create a thorough and streamlined estate plan.

Below we highlight what a trust is, what assets to include, and how best to manage a trust over the long term.

Understanding the Value of a Trust

A trust is a legal arrangement that allows one person to designate certain assets to another person. It creates an administrative process that helps structure your wealth distribution strategy. Three parties comprise a trust agreement,

  • Grantor—the person who establishes the trust.
  • Trustee—the person/entity that manages the trust and takes charge of the distribution. 
  • Beneficiary—the person/entity that receives assets from the trust. 

As the grantor, you can actively fund the trust now or name the trust as the beneficiary on specific accounts, so the funds won’t transfer into the trust until you pass away. 

The big thing to remember here is that trusts issue an administrative process that enables your estate to honor your intent. Parents often find an excellent use for trusts. You may not want your 18-year-old to inherit a $500,000 investment account if you pass away. With a trust, you can establish the cadence for your child to access the funds. 

Establishing a trust can save your loved one’s time, paperwork, and even potential tax obligations after your passing.

Revocable vs. Irrevocable Trusts

In estate planning, you’ll often run across two types of trusts: revocable and irrevocable.

Revocable, or living, trusts are the most common, as they provide the grantor additional flexibility and control. You can alter or change the trust terms at any point, which is helpful if your intent changes. A revocable trust effectively keeps your assets out of probate, but it may not protect certain assets from estate tax liabilities (more on this below).

By comparison, you can’t change an irrevocable trust once you create it, and you can’t access any assets in the trust. In some cases, this arrangement may protect your assets from estate tax. Assets owned by an irrevocable trust are no longer a part of your estate, meaning creditors can’t touch them in the event of bankruptcy or other financial hardship.

What Should You Put in a Trust?

When establishing an estate plan, your assets will fall under two categories: easy money and hard money. Items with very little or no tax consequences when transferred are considered easy money, and assets with more considerable potential tax consequences are called hard money.

Trusts are ideal for the transference of easy money, such as:

  • Real estate
  • Life insurance policies
  • Checking accounts
  • After-tax brokerage accounts
  • Non-retirement accounts

What Should You Leave Out of a Trust?

Remember, “hard money” describes assets that will have more tax consequences after you pass. 

These could include:

  • IRAs
  • 401(k)s
  • Annuities

Rather than putting hard money in a trust, you could leave them directly to a beneficiary. In most cases, a spouse is exempt from paying taxes on the transference of these types of assets.

If you intend to make a minor, like a child or grandchild, one of your beneficiaries, remember that they are not legally allowed to inherit specific assets, including land or property. You may, however, be able to establish a trust to hold certain assets until that child becomes of age to receive them.

How to Manage a Trust Long-Term

Living trusts often don’t receive any assets while we’re still alive. As an estate planning tool, they typically receive assets once you and your spouse have passed.

A trust can be a good place to pool assets together before your beneficiaries can access them. After your passing, the trust can pay for things like funeral expenses, upkeep of your home, bills, debts, and whatever other financial obligations you may leave behind. Once those expenses are covered, the remaining assets within the trust will be split up and distributed to your beneficiaries. 

Using a trust this way is an incredibly effective strategy, as it ensures all funeral and final arrangement costs are covered before distributing assets. If your assets were to be distributed to your beneficiaries right away, the question becomes, “Who pays for what?” when the bills come due, or the mortgage on your home needs paid. 

These uncertainties can make an already stressful situation harder on your loved ones. Proper planning with a well-established trust helps avoid this challenging situation.

Trusts and Your Estate Plan

Here at Legacy Wealth Advisors, we’re firm believers in the power of trusts. We’re happy to collaborate with your estate attorney or other planning professional to determine how they may best fit into your estate planning strategy. 

Our goal is to help you peacefully transfer wealth to family and loved ones in the most effective way possible.

Give us a call anytime to discuss your estate planning opportunities.

Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted.

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication or future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

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The Top Estate Planning Must-Haves For Parents With Young Kids

One of the greatest fears many parents have is leaving their child too soon; even worse, a child left without either parent to care for them. It’s a nightmare no one wants to think about, but a scenario young couples should prepare for.

  • If you and your spouse were gone tomorrow, who would you trust to care for your child?
  • What about their financial well-being? 

These are tough questions but ones you must ask to develop a sound estate plan. Below we’ve identified a few things to consider regarding estate planning for parents with young children.

Considering the Worst Case Scenario

To emphasize the importance of planning, here’s a possible scenario:

Tom and Stephanie are in their early 40s with two children.

If both Tom and Stephanie pass away suddenly with no estate plan in place, here’s what would happen:

Their estate would go into probate, and the probate court would determine who physically cares for the children. Since Tom and Stephanie did not leave any documentation behind to help make this decision, the court chooses the caregiver based on their closest living relatives, likely their parents or siblings.

In some cases, this arrangement would work out fine. But leaving the future care of your children up to someone else may not always provide the outcome you’d want. Instead, it’s necessary to plan and prepare ahead of time to ensure your children are cared for in a way that you’re comfortable with.

Thinking Through a Family Disaster

Consider creating a family disaster provision. This document should highlight the next steps if something happens to your entire family. You might decide to leave your assets to charity or split them among remaining relatives and loved ones. This provision would tell your remaining heirs how to proceed, no matter what you choose.

The Benefits of Planning Ahead

Planning ahead keeps you in control of what happens to your estate and children after your passing. It allows you to decide, in order, who will be the caretaker for your children. This is especially important for parents who do not want their closest relatives (like parents or siblings) to care for their children.

Outlining these wishes in a will should be a top estate planning priority, as it can be one of the most impactful on your family after your passing. 

In addition, estate planning tools like your will and beneficiary designations can help the courts, your financial team, and your heirs understand your intent. Your intent allows others to see how your estate should be divided amongst remaining loved ones and how your children should be cared for.

Understanding Guardians and Conservatorship

In your will, dictate who should be guardians and conservators for your children. Below we’ve outlined the differences between these two.

Who Is a Guardian?

A guardian is a legal, physical caretaker of a child until that child turns 18. This person is who the child will live with. They will be in charge of raising your child, sending them to school, feeding them, and doing other day-to-day activities.

Of course, whoever you name as guardian should be someone you trust deeply. If possible, you may want to look for a guardian who has a similar value system regarding things like religion, impact goals, charitable giving, etc. 

What Is a Conservatorship?

A conservatorship puts someone else in total control of your or your child’s financial assets. In terms of estate planning, this is the person who will be responsible for the money you leave to your children. A guardian can also act as a conservator, or you can choose to make the conservator a separate person.

Think About a Trust

If you’re concerned about the impact a significant financial windfall may have on your children, consider creating a trust. As an adult, it’s overwhelming to manage a considerable windfall. Imagine having to take on that responsibility at the age of 18.

Instead of putting a lump sum in your children’s hands, creating a trust helps you dictate how much access your child will have to their inheritance. If you don’t want them to receive the lump sum when they turn 18, you can work with a financial professional to put parameters in place. Doing so can help keep your child supported financially for a more extended period.

If you’ve identified a conservator, they may be a part of your child’s trust as well. For example, the conservator may have access to funds to cover large expenses like medical emergencies or education.

Trusts can be complex, and we recommend working with our team at Legacy Wealth Advisors to review your options carefully before establishing one.

Establishing Trust Provisions

If you’re considering creating a trust, think about what provisions to include. For example, you can create a distribution schedule that gives your child access to the funds throughout their lifetime.

Here’s an example of a distribution schedule:

  • $25,000 at age 25
  • Half of the remaining balance at 30
  • The remaining balance at 35

Staggering the windfall can help your child make intelligent financial decisions independently. They can prepare for how they’d like to preserve or spend their inheritance, making it a valuable part of their greater financial life.

Maintaining Life Insurance

As young parents, life insurance provides your surviving loved ones with a financial safety net should you die unexpectedly. Raising a child is expensive, and your designated guardian may not have the means to continue offering the same standard of living, even with access to your remaining assets.

Life insurance is something that every young family should have while hoping they never have to use it. We recommend that most families opt for term life insurance, as it tends to be a more cost-effective solution that can still provide a generous death benefit.

Estate Planning for Young Families

The chances of young parents passing away is slim, but tragedy does strike from time to time. It’s essential to have a plan in place should something happen to you and your partner while your kids are still young.

At Legacy Wealth Advisors, we help families develop a plan, work with other estate planning professionals, and feel confident with their decisions. If this is something you’re looking to accomplish, we’re happy to help.

Schedule time to talk with our team today.

Disclosure:

Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted. All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication or future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

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How To Navigate Family Dynamics When Choosing Executors and Beneficiaries

It’s arduous to think about how your passing will impact loved ones. 

And while mourning the loss of a family member is tough enough, family dynamics regarding your estate and legacy can make it even more complex.

While you’re still in good health with many exciting years ahead, now’s an ideal time to consider how you want to handle your final wishes, especially with delicate family relationships. 

You’ll want to ask questions such as:

 

  • Who can execute my estate plan? 
  • Which family members shouldn’t be beneficiaries?
  • Who do I trust to carry all of this out?

 

As you make these considerations, Legacy Wealth can help. Below we’ve identified a few ways you can navigate through these challenging estate planning decisions.

1. Identify The Roles You Need To Fill

Your estate plan doesn’t occur in a vacuum, and your documents can’t just speak for themselves. Several surviving loved ones play critical roles in executing your estate plan. 

The people you choose should be trustworthy, responsible, and able to make decisions in your estate’s best interest.

Common roles you’ll want to fill include:

Executor

Your estate’s executor will work directly with your team of financial professionals to manage and settle your financial obligations after your death or incapacitation. 

Specific tasks could include filing a tax return for your estate, paying bills, and dividing personal property. This person will help distribute your estate’s assets to the appropriate parties and provide any required legal notices of your passing, like insurance companies, banks, and other institutions.

Durable Power of Attorney

A power of attorney is a legal document that allows someone to make decisions on your behalf in the event of incapacitation. This person can manage your money on your behalf, meaning they’re able to make financial decisions like selling a home, depositing money, paying bills, etc. 

Once you pass away, a power of attorney document is no longer valid, and an executor becomes in charge of your affairs.

Healthcare Power of Attorney

Like what we described above, a healthcare power of attorney can make medical decisions on your behalf. This person can step in to manage your day-to-day care, and they can be called upon for life or death decisions.

Trustee and Conservator

If you have a trust, you need someone in charge of managing the assets inside the trust, aka a trustee. In addition to managing the assets and making financial decisions, like hiring an advisor, this person also heads distributing the assets based on the trusts’ terms. 

Do you have minor children? If so, you’ll want to name a conservator in your will. A conservator handles the financial affairs for your child, such as trust assets, paying for school, taxes, and other expenses. 

Guardian

If you’re the physical caretaker of a minor or adult with special needs, you’ll need to identify someone who can take your place when necessary. A guardian would take care of your child after your passing, and they will have complete control over where the child lives, goes to school, etc.

Beneficiary

Your beneficiaries are the people or institutions receiving assets from your estate or trust after your passing. Select your beneficiaries carefully as they play a significant role in the wealth transfer process. More often than not, official beneficiary designations supersede what’s in your will, so it’s critical everything remains up to date to avoid tension and arguments. 

2. Consider Your Legacy

While estate planning can feel messy and overwhelming, there’s something you can do to help ground your emotions during the process.

Focus on your legacy.

A legacy isn’t only something you leave behind; it’s something you live by that drives your actions, motivations, and core values. Think about what those values are and how you want to see them reflected in your legacy. 

Ask yourself,

  • What does your legacy mean to you?
  • How can you intentionally infuse your estate plan with your goals and values (directing some money to charity, setting up a fund for your grandkid’s education, paying off your child’s debt, etc.)?
  • In what ways do you live out your legacy goals every day?

Remember, your values should be the driving force behind your estate planning efforts. While family dynamics can be awkward, focusing on your legacy puts the decisions you’re making now into a clearer perspective.

3. Communicate With Key Players

Before speaking with anyone in your family about your plans, have a clear sense of who you want (and don’t want) to include in your will. Making your mind up before speaking to others can help you stay firm, especially if you’re worried others may try to persuade or bully you into changing your mind.

Once you’ve made a decision, communicate with your “key players” first. These will be the people who have roles like executor, guardian, and power of attorney. 

Make sure they’re comfortable taking on this responsibility by reviewing the role in-depth with each person. They should know how their role will work within your greater estate plan. Getting this person (or people) comfortable first is essential before moving on to managing more complex family dynamics.

Next, communicate your wishes with your immediate family and/or closest friends, typically a spouse and children. These are likely the people who your passing will most impact, and keeping them well-informed of your plans now can help make the transfer process smoother when the time comes.

4. Keep Potential Conflicts in Mind

There are plenty of reasons why a relative or friend may be unhappy with your decisions. You may be leaving an estranged child out of your will, or someone is unhappy with how much of your estate is going to charity. 

It’s hard to please everyone, but the only person who needs to be comfortable with your plan is you.

If this sounds like a problem you’re likely to encounter, you need to decide if you should put your estate planning decisions out in the open now or wait for others to find out after your passing?

While the decision is up to you, typically communicating your wishes to immediate family and your estate planning attorney is enough. Most prefer to avoid opening a can of worms before they have to.

At the end of the day, remember that this is your estate plan. If a child or relatives feels frustrated by their decisions, it’s important to remember that they aren’t their decisions to make.

5. Work With a Solid Professional Team

Estate planning is complicated, and you want to make sure you’ve covered all your bases. We recommend building a team of financial professionals who can help develop and execute your estate plan.

At Legacy Wealth, we can provide these valuable professional connections—advisor, estate planning attorney, tax professionals, and more—to help create a more seamless transition process when the time comes. 

To learn more about our extensive experience in estate planning, schedule time to talk with our team soon.

Disclosure:

Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan.

The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted. All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication or future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

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Easy Money vs. Hard Money and How They Both Impact Your Estate Plan

The estate planning process is a complicated endeavor, but it’s an essential part of protecting your assets and loved ones after your passing. 

One way to think about the division and transfer of assets is to place them into two categories: easy money and hard money. But what do these terms mean, and how can you intentionally use them in your estate plan?

In this post, we’ll cover the difference between the two and how you can incorporate both into the estate planning process.

Understanding Easy vs. Hard Money

What’s the difference between easy assets and hard assets?

Easy Money

Easy money refers to items with little to no tax consequences when being transferred to loved ones after your passing.

Examples of easy money include:

  • Real estate
  • Checking or savings accounts
  • Life insurance policies
  • After-tax brokerage accounts

Hard Money

Hard money describes assets with potential tax consequences during the transfer from one individual to another.

Examples of hard money include: 

  • IRAs
  • 401(k)s
  • Annuities

Estate Planning With Easy vs. Hard Assets

Once you understand what category your assets fall into, it’s important to determine how those categories actually function in your estate plan.

First, Determine Your Intent

Just as it sounds, start by determining what the intent for your assets is after your passing. Essentially, where do you want your money to go?

Do you want everything to go to your surviving spouse? Or should your estate be split equally among your children? Some people have more involved intentions for their estate, with plans to create scholarship funds, donate to charity, and more.

Understanding your ideal scenario for your assets after your passing is the first step in building an estate plan. Starting with intent allows us to work backward in determining how to make it happen.

Tax-Efficient Estate Planning

Taxes are perhaps one of the most significant threats to the transfer of your estate, and the good news is there are ways to establish a plan that minimizes these impacts. When considering your intent for your estate, keep in mind what types of assets are subject to tax and how that’ll impact who receives them.

For example, leaving assets to a spouse instead of a child tends to be more beneficial when handling “hard money” like retirement accounts. 

Why?

For one thing, the SECURE Act eliminated the “stretch” provision on inherited IRAs for most non-spouse beneficiaries. So while a spouse could stretch distributions over their lifetime, a child would have to take out all the funds within 10 years. That rule could create additional tax hurdles for your children. 

If you’re looking for a tax-free asset transfer for your children, consider making them a joint owner on a checking account. That way, when you pass, they can access the funds in that account right away without probate. 

A financial professional can help determine the potential tax consequences of your estate plan and work with you to create tax-efficient transfer strategies.

Easy Money and Hard Money, Where Do They Go?

Estate planning is rarely cut and dry, but the following tips tend to be a valuable place to start. 

  • Easy money—real estate, life insurance policies, and checking accounts—tend to present good opportunities for joint ownership or naming a trust as a beneficiary. 
  • Hard money—IRAs, 401ks, and annuities—is often best to leave to your surviving loved ones, aka direct beneficiaries.  

But who you leave your assets to and how you do it depends on the three core estate planning principles:

  • Intent
  • Maximizing efficiency
  • Minimizing cost

For example, a trust isn’t appropriate for every person’s estate plan. In fact, for most of our clients who have trusts, the vehicle doesn’t own anything until the original creator passes away. The reason is it’s often best to name the trust as a beneficiary for easy assets. 

Managing the division between easy and hard assets as a part of your estate plan can be complicated. Working with a knowledgeable professional may be helpful in determining the best course of action.

Easy and Hard Money In Action: A Family Case Study

It’s not easy to visualize all the estate planning tools at your disposal. So let’s put these ideas in context with an example from a fictional family. 

Jim and Carol Carson are a retired couple in their mid-70s. They have three adult children: Stephanie, Kiera, and Todd. Their most significant assets are an IRA, savings and checking account, and their house. Here’s an example of what their estate plan might look like. 

We’ll start with intent. 

The Carsons would like to leave everything to the surviving spouse. After the spouse passes away, they want to divide their estate equally among their children.

The following is an example of a strategy the Carsons could use to maximize the efficiency of their estate and minimize the tax liability based on their intent. 

  • Jim names his wife Carol as the primary beneficiary on his IRA. He also lists all three kids as contingent beneficiaries. 
  • Jim and Carol jointly own their savings account, so they can both access the funds. They also list the trust as the beneficiary once they pass. 
  • The Carsons decide they’ll have the oldest child listed as a joint owner for their checking account. That way, they could use it for unexpected medical costs, funeral expenses, etc., without waiting for probate.
  • Since the Carsons live in Michigan, they establish a ladybird deed on their house. That way, Jim and Carol jointly own the home, and when both of them pass away, the house will go to the trust. 

As you can see, the Carsons used several estate planning tools to their advantage: joint ownership, direct beneficiaries designations, a trust, etc. Did you notice the Carsons didn’t rely on a will? Learn more about why a will shouldn’t be your go-to estate planning document. 

There’s not one magic estate planning tool that will help you accomplish every one of your goals. But using various elements can help you keep your intention at the center of your estate plan. 

Estate Planning with Legacy Wealth

If it feels like estate planning is complicated, that’s because it is. You know you want to do right by your remaining loved ones, which means making a purposeful and tax-efficient plan.

The first step is to collaborate with professionals like us at Legacy Wealth. We’re here to create a holistic financial plan by working with you and with estate planning professionals to help ensure the peaceful transfer of assets to your heirs after your passing.

Feel free to schedule time on our calendar to get started.

Disclaimer: Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. 

Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted. All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication or future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed.

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5 Items to Cross Off Your Estate Planning Checklist for 2022

The new year is an exciting time to start fresh and celebrate new beginnings. As you get to work putting your financial house in order, now’s an ideal time to run through your estate planning checklist.

If you haven’t started your own to-do list, that’s okay! Our team at Legacy Wealth Advisors has put together a quick, five-step list anyone can use to brush up their estate plan heading into 2022.

Item #1: Assess Your Assets

First things first, take stock of your assets. From family heirlooms to vacation properties, you need to account for everything of value in your estate plan.

This could include:

  • Houses
  • Rental properties
  • Cars
  • Boats
  • Artwork and collectibles
  • Jewelry
  • Electronics

It’s possible you may have accrued or lost assets since the last time you looked at your estate plan. Taking a few minutes to check can help ensure your assets are properly passed down to loved ones when the time comes.

Item #2: Review Your Insurance Policies

Once you’ve reassessed your assets, the natural next step is to review your current insurance coverage. Does your homeowner’s insurance adequately protect your belongings? Or do you need to add additional riders or endorsements to cover everything?

Another essential question to consider—what types of insurance do you need? Should you still be carrying a life insurance policy if you’re in retirement? If your children are grown, independent adults, it could be time to drop or reduce your policy.

If you’re concerned about your future care, perhaps you want to add a long-term care policy.

Estate planning is about protecting yourself, your belongings, and your loved ones when you become unable to care for yourself. Your insurance coverage should reflect your wishes, working in tandem with the rest of your estate plan to reduce the financial burden on you and your loved ones.

Item #3: Reflect on Past Changes

A lot can happen in 12 months, especially these past 12 months. Have you had any major life events that could affect your estate plan?

Impactful changes on your estate plan could include:

  • Marriage
  • Divorce
  • New in-laws
  • Grandchildren
  • Retirement
  • Large inheritance or windfall
  • Medical diagnosis

List out any changes you and your spouse have experienced over the past year, and we’ll help determine if you should make changes to your estate plan accordingly. 

Nobody wants to forget a grandchild in their will, and taking the time to check for these changes now can help prevent such blunders later down the line.

Item #4: Organize & Review Documents

Should something happen to you tomorrow, does your family know where your important documents live? Do you?

Establish a safe, secure location where you can organize and store the relevant documents your family will need during the transfer process. Create digital copies (if possible) and give select beneficiaries access.

While you’re sorting your documents, review your current power of attorney, patient advocate, and joint ownership on accounts. If you haven’t yet established these, add this to your to-do list. These are the individuals who can speak on your behalf and in your best interest should you become incapacitated.

Our team can help you and your loved ones determine these designations while keeping potential tax considerations in mind. For example, creating joint ownership on bank or investment accounts can keep your assets protected from certain estate or inheritance taxes during the transfer process.

Item #5: Update Beneficiaries

Similarly, take some time to review and update the beneficiaries to your accounts. This could include insurance policies, retirement accounts, mutual funds, annuities, and more.

If you’ve gone through a life event like marriage or divorce, your current beneficiary designations may be outdated. Having an up-to-date beneficiary designation is crucial, as this person will help execute your final wishes. It may be difficult (or impossible) to correct errors in designations after your passing, and trying to fight it could cost time, money, and heartache for your loved ones.

Having your beneficiaries established now can create a smoother transition process and help your estate avoid probate. Something that, again, could otherwise cost your heirs time and money.

Bonus Item: Build Your Estate Planning Team

One of the most impactful items you can check off your estate planning to-do list is building the right team of trusted financial professionals. Having a knowledgeable professional at the helm can help ensure your estate plan is staying the course.

Whether you’re building your team from scratch or looking to grow your support system, Legacy Wealth Advisors is happy to help. We work with individuals and couples in retirement who are focused on optimizing and protecting their hard-earned wealth.

Don’t hesitate to reach out to our team to see how we can help navigate you and your loved ones through the estate planning process.

Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted.

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication of future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

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