Though no one likes thinking about their death, organizing your estate will assist in avoiding needless arguments within the family and lessen the burden of taxes on your surviving loved ones. If you run a family office, you’ve probably thought about succession planning to ensure the appropriate people are in place to keep your business running. Simply put, estate planning is the next topic of discussion. Protecting your fortune and deciding how to distribute your assets to the following generation are the two main goals of an estate plan.
These are a few things an estate planner can assist you with thinking about.
What aspects of Estate Planning Should You Take into Account?
Planning an estate can be a very difficult task. You should talk to your financial experts about the following seven factors:
1. Final Will and Testament
The Will is the most fundamental component of estate planning. This document, which distributes your assets in accordance with your objectives, is legally enforceable. To execute your desires and oversee the Will to probate, you will require an executor for your Will. You must consider who will inherit what and how each person will be able to manage their inheritance.
2. Exemptions from estate taxes
If your estate is large (more than $11.58 million), you should minimize estate taxes by anticipating them and working with experts. Giving loved ones a portion of your estate while you’re still living is a popular strategy because it has various tax implications for you. As a matter of fact, the gift and estate tax exemption was doubled until 2025, according to the Tax Cuts and Jobs Act (TCJA). In 2023, this plan provided an individual tax break worth $12.9 million and a married couple tax exemption of almost $25 million. To minimize the effect on your wealth, you will need to talk about the different federal and state tax laws.
3. Life Insurance
Life insurance is another crucial factor to consider when creating an estate because it can be used to pay estate taxes or support your family financially. Additional taxes would be required if your beneficiaries decide to take the insurance policy payoff in instalments. Although it’s not always the greatest choice, you might think about transferring the insurance coverage to an irrevocable trust for life insurance (ILIT). It is crucial to bring up any life insurance plans during the general estate planning consultation with a professional.
If you intend to leave your fortune to succeeding generations in addition to the current one, think about creating a dynasty trust. This dramatically lowers the tax obligations on the money your family can pass down through the generations. Should the assets stay in a dynasty trust, there will be no undue estates or generation-skipping transfer tax on the transfer of wealth.
One of the most critical aspects of financial management is estate planning, which calls for serious thought and deliberate action. To guarantee a seamless transfer of assets and the safety of their loved ones after their death, people and their families need to consider several criteria.