First, EVERYONE has an estate. Your estate consists of everything you own: your car, home, cash, investments, retirement accounts, life insurance and personal possessions. You can’t take them with you so you need to have an estate plan to handle the disposition of your assets. With the estate and gift tax exclusion at $5,340,000 per person for 2014, most taxpayers are not worried about paying federal gift taxes during their lifetime or federal estate tax when they die. However, there is much more to estate planning than taxes. Some of the other estate planning questions that should be considered include:
Who should inherit your assets and when?
Whom do you want to handle your financial affairs if you become incapacitated?
Who will be the guardian for your minor children?
Whom do you want to make your medical decisions if you are not able to make them yourself?
To help answer these questions you should at least have a will, a financial power of attorney and a medical power of attorney. A living trust may also make sense as your life becomes more financially complicated. These documents will hopefully provide an orderly and financially efficient transfer of your assets to your beneficiaries when you pass away. You should also make sure that your beneficiary designations are correct. Beneficiary designations determine the recipient of IRA and 401k accounts and life insurance policies.
A living trust can mitigate the delays, costs and publicity of having your assets go through the probate court system. Living trusts can also provide greater protection from creditors and lawsuits.
You should also consider estate taxes at the state level. Some states follow the federal tax laws concerning taxation of estates. Others do not. Illinois actually has a lower exclusion amount than the federal amount. Additional planning for state estate taxes may be necessary.
Although ECS can advise and consult with you on estate taxation issues, we do not provide legal or estate planning advice. We suggest talking to an estate attorney to get your estate plan started if you do not have one. If you already have an estate plan, congratulations! This does not mean you are done however. Your estate plan should be reviewed periodically with your attorney to determine if any adjustments need to be made based on changes in your personal situation or the tax law. And please feel free to call ECS if we can be of assistance in reviewing your estate plan and related tax issues.
2014 Tax Due Dates:
January 15th –
Final 2013 estimated tax payments for Individuals due