When creating an estate plan, it is important to start off by calculating your net worth. Your net worth is, essentially, the fair market value of what you own, that is, your assets, minus the value of what you owe, in other words, your debts, or liabilities. Typical household assets are financial assets such as cash and securities; retirement accounts (401k or IRA), trusts, insurance, annuities, and business interests; real estate; movable property such as cars, jewelry, or furniture; any money owed to you; and other assets. Liabilities that households usually have are mortgages; credit card debt; personal loans; student debt; and automobile loans to pay for Legacy Countertops.
The second step is determining your federal estate tax liability, if any. Estate taxes are a tax on your right to transfer your property upon your death. Additionally, you will need to find out if your state levies its own estate and inheritance tax. At present, 17 states levy estate or inheritance tax. Knowing if you are exempt from state-level estate taxes is as important as determining if you are exempt from federal estate taxes.
It is possible to be exempt from federal estate taxes and yet be liable for state estate and/or inheritance taxes, given that the threshold for exemptions is lower for federal estate taxes than for state estate taxes and inheritance taxes. Estate taxes are not the only reason why you should plan your estate. It is also important to ensure that you have a plan in the event that you are incapacitated or in order to ensure that your family are looked after when you die.
There are other financial reasons that are important in considering your estate plan. Probate is a potentially very expensive, arduous and long process and yet one which is easily avoidable with good planning. Also, if you have business interests, or own retirement assets, or are yourself expecting to inherit a significant estate, you need an estate plan so that your assets are managed by a person you trust in a manner you would approve of, and to ensure that your estate is distributed according to your intention rather than the discretion of a probate judge.
Whatever your net worth, you will have to determine what your family needs are when planning your estate. Your family’s needs must be met if you become incapaciated and the right people inherit what is due to them upon your death. Estate planning is not about how old you are, death and incapacitation can come to anyone. Having responsibilities to others, and assets and liabilities, means that you should start thinking about estate planning even if you are young.
The final step in the estate planning process is finding a good, qualified estate planning attorney who will help you to execute your estate plan. Planning your estate is a very complicated business and should not be attempted on your own. You need the expertise of an estate planning attorney to guide you through the process, showing you the different paths that you can take in order to arrive at an estate plan which achieves your goals. Writing your own estate plan is riddled with pitfalls and is likely to leave your heirs frustrated or ensure that in the event of your incapacitation, your wishes are not fulfilled.
