“Why, Eckhardt, you oughta think about the future.”
. . . Eckhardt merely scoffs at the statement, “You’re an A-1 nut-boy, and Grissom knows it.” Later as things had changed, he is told again, “Eckhardt! Think about the future.” Of course then Eckhardt is killed.
Avoid the ‘Death Tax’.
The above is taken from Batman, I am interested in all its characters and those who play them. However, this post isn’t about Batman.
Recently, a big Estate I have been working on for well over a year (short considering the dispute that had started in probate) closed. Happily things turned out for the best for my client. I mean minus Lawyer fees and court cost along with other assorted cost. needless to say, she lost out on some of her due inheritance. When I learned that Actor Heath Ledger had no previsions in his will for his infant daughter. A family battle ensued over his assets.
The more I thought about the above mentioned I came to wonder about how things are for most, including my personal situation. My conclusions have sparked this post.
Those with small estates should read this well, as should those of you with large estates. When you leave this world, most have it in their mind that family members will see that “things will be handled” as to your wishes. Don’t bet on it. We all know you can’t take it with you. You can however try to preserve as much as possible for your children and even try to control how they spend it. (65k in the hands of an 18 yr old could be wasted on frivolous expenditures.)
What you can do to see that things are truly handled to your wishes is create an estate plan and keeping it updated, no matter what your net worth is. Keeping it updated is critical. Poor planning can destroy a family with strife and bitter feuds among those who are or think they should be beneficiaries.
Yes, we all want to avoid the taxman, but first, and for most, consider the emotional impact your decisions will have on your children and other beneficiaries. When dividing your estate, take into considerations earlier gifts you’ve made. Your children will recall them and factor them into their mindset about whether they were treated fairly or not by your inheritance plan.
What you leave your children should be divided equally. If you give less to a child who has been very successful in their life and more to their sibling/s who are barely making ends meet you will create animosity.
Don’t just leave a child an outright inheritance. This leaves them no protection of the inheritance. If the child files for bankruptcy, has an accident, or gets a divorce they stand to lose their whole inheritance.
Now let’s avoid the taxman, if we can.
Giving money away can reduce the value of your taxable estate. You can give any number of individuals up to $14,000 each year without any tax penalty. Over this amount and your gift will be subject to the gift tax (paid by giver, not receiver). The annual exclusion for 2016 and 2017 is $14,000.
Purchase a life insurance policy that will cover the taxes on your estate. Give money to your kids and have them take out life insurance on you. When you die the life insurance company will write the kids a check tax-free.
One of the most popular tools for reducing estate tax is a Trust. These can be expensive averaging between $2,000 to $5,000 to set up, not to mention they are complicated.
The best thing you can do is to find and retain the services of an estate planner. Lawyers do this. However, as I always point out when looking for a pro, find one that specializes in what you’re looking for. (Don’t hire a bankruptcy lawyer to handle your estate planning.)
Then stay on top of it, keep it up to date. Once you have a plan, update it regularly to reflect changes. (e.g. revised tax laws, asset value, marriage or birth. . .)
Nobody wants to talk about death or money. Estate planning is like planning a big party that you’ll not be able to attend. Nor will you be around to fix anything that goes wrong. Remember when you die, your children will no longer act like your children. Instead, what you’ll see are just everyday people dividing what they think is free money. Usually when money becomes involved, family loyalties fly right out the window. So please, create an estate plan.
For more info… visit Frequently Asked Questions on Gift Taxes
Or visit with your tax Pro.