Choosing Your Destiny: Estate Planning Tips
Counseling our clients about strategy is a big part of our job. We work with you on drafting your company’s standard form contracts, change order requests, invoices and credit applications. We help you navigate and negotiate the complex world of construction disputes. We develop appropriate workplace procedures that protect your employees and your business. With all of the above, our clients frequently forget one of the most important aspects of their life and business — a solid strategy for succession planning and wealth preservation.
In this Issue’s quiz, we’ll provide answers to some of the most common misconceptions about estate planning. Here are some quick tips on gifting, life insurance, and estate taxes.
Gifting is a great way to make a difference in other people’s lives while avoiding estate taxes.
Answer: Maybe.
While gifting has the potential to reduce estate tax liability, it should be done carefully. For example, gifts made to a family member within three years of death may still be subject to estate tax. The beneficiary of a lifetime gift may also incur unforeseen and undesirable capital gains tax consequences. If you are considering giving to a charity, you should consider lifetime gifts or provisions for charities in trusts or wills. You can use a charitable trust to reduce the size of your estate while still retaining an income stream. There are many types of charitable trusts which may benefit you, your family, or other non-charitable beneficiaries.
Despite all the terrible TV commercials and the hard sell I get from my broker, life insurance is a worthwhile investment.
Answer: True!
Life insurance can be an invaluable estate planning tool if you know how to manage the asset. By creating an irrevocable life insurance trust, you can hold life insurance policies while eliminating estate taxes on the death benefit proceeds. The key is to name the trust as the beneficiary of the life insurance policy, not your spouse or child. Upon your death, the life insurance proceeds are held in the trust for the benefit of your loved ones for the remainder of their lifetime. As a result, the proceeds of your life insurance policy are not subject to estate taxes. The balance of the proceeds passes to your children or other beneficiaries upon the death of your surviving spouse or partner.
Everyone pays high estate taxes. It is just part of life.
Answer: False.
How much you pay in estate taxes is entirely dependent on where you live and your estate planning strategy. Only nineteen states and the District of Columbia impose inheritance or estates taxes on their residents. In Pennsylvania, residents pay a flat inheritance tax rate and life insurance proceeds are not subject to the State’s inheritance tax. New York is in the process of modifying its estate tax exemption to match the much higher federal exemption. In contrast, some states like New Jersey have both an inheritance and an estate tax. As these comparisons demonstrate, since estate taxes vary greatly across the US, it is absolutely critical to know your state’s law and plan accordingly. Estate planning is a critical component to leaving the legacy YOU choose. Strategize and map out your desired wealth outcome. Don’t wait. If planning on your own is proving to be a daunting task, reach out for help.