The estate tax exemption, currently set at $11.7 million for singles and $23.4 million for married couples, is set to expire in 2026. However, the current administration has signaled a desire to reduce the exemption, though no one knows exactly when that might happen or how low the exemption might go. This uncertainty means that anyone with more than $5 million in assets may want to maximize life-time giving while minimizing taxes.
The internet offers all the information and tools we need at our fingertips to create our own estate plan, right? For most people, this is simply not true. Several years ago, Consumer Reports®, an independent nonprofit consumer watchdog group, created wills using the forms provided by DIY websites and asked three law professors to review them. Although the professors found that the wills drafted using the DIY services were better than wills drafted by non-lawyers on their own, they were inadequate to fully meet the needs of most consumers. Although your DIY “estate plan” may initially cost only $49.95, it may end up being much, much more expensive than an estate plan designed by an experienced estate planning attorney.
It seems like everyone wants to avoid probate.
While there can be benefits to avoiding probate, most of my clients are best served by planning for their estates to go through probate, rather than using a revocable living trust. There are a lot of myths about why probate should be avoided, particularly in Washington State.
Last week, I started this series on trusts with a very basic overview of what a trust is — a legal agreement between three parties, captured in a document usually called trust agreement, where the trustee(s) manages the assets of the grantor(s) for the benefit of the beneficiary(ies). This week, I’m focusing on some of the main types of trusts. Trusts can be broadly sorted into binary categories, and it’s helpful to start with these broad categories in order to understand why your attorney is recommending one type of trust over another. Different trusts are useful for different reasons, depending on the situation.
For the month of January, I’m going to explore trusts. Trusts can be a useful part of an estate plan, but they are not nearly as ubiquitous in Washington State as they are in man other parts of the country. In many states, like California and Florida, trusts are significantly easier and cheaper than probate, where a $670,000 estate could spend almost $34,000 on attorney fees and court fees. In Washington, attorney and court fees rarely exceed a few thousand dollars. Because trusts are not as frequently used in Washington, I get a lot of questions about what they are, how they work, and why I am (or am not) recommending one. This series of blogs will help explain what a trust is, what the differences are between different kinds of trusts, and when you might need one.
n a first marriage, the estate planning goals of each spouse are typically aligned: take care of the surviving spouse for as long as he or she lives, and then divide what’s left equally among the children. This also makes sense because most couples jointly own their assets, and estate taxes favor the surviving spouse.
But in a subsequent marriage, or when marrying later in life or after amassing significant wealth, the goals may not be so perfectly aligned.
hould I tell my estate planner I’m expecting an inheritance?
Yes. While some people are hesitant to count their chickens before they hatch, looping your estate planner into your full financial picture is the best way to prepare for whatever the future may hold. By planning ahead, you can help ensure that whatever is left to you will be protected and able to be enjoyed for years to come. With all of the emotions that surround the passing of a loved one, you’ll be able to focus on grieving and the administration process, without having the additional worries of how you will handle your finances.
When it comes to estate planning there are several types of tools you can use, depending on your circumstances. One such estate planning tool is the trust. There are numerous types of trusts aimed at fulfilling different estate planning purposes. If you are anticipating an inheritance, there is a special type of trust designed to help protect it: an inheritor’s trust.
A 2012 study by Ohio State researcher Jay Zagorsky found that about one-third of Americans who receive an inheritance have negative savings within two years of getting their money, and of those who receive $100,000 or more, nearly one in five spend, donate or simply lose it all. If you are about to receive an inheritance, there are several steps you can take to insure your funds will last longer than a few years.
Receiving an inheritance is a huge blessing but, if not handled properly, can also become a curse. Often times, the inheritor does not know what to do with the new asset and runs into financial trouble, squandering most, if not all of it. This could happen due to the inheritor having outstanding creditor issues or tax troubles or being inexperienced with managing the new assets. No matter what the financial obstacles maybe, estate planning can help address or even eliminate these issues. For these reasons, it is vital to update your estate plan - or create one if you have not already - if you have received or are expecting to receive an inheritance.
