Everyone Needs an Estate Plan

Approximately 55 percent of American adults do not have a will or other estate plan in place. This number has stayed relatively steady during the 2000s, even as the number of other estate planning documents Americans have — like medical directives — has increased. Among minorities, the numbers are higher than in the general population: 68 percent of African American adults and 74 percent of Hispanic adults do not have one.

Now, believe it or not, you have an estate. Nearly everyone does – even the young child with a bank account in his name that his grandparents set up, or the coming-of-age girl who received a gold necklace for her 16th birthday. Your estate is comprised of everything you own — all your possessions, your car, home, any other real estate, checking and savings accounts, investments, life insurance, furniture, etc.

No matter how large or how small, everyone has an estate, and here’s the bad news—you can’t take it with you when you die.

When that happens, and it is a “when” and not an “if,” you probably want to control how those things are given to the people or organizations you care most about. To ensure your wishes are carried out, you need to provide instructions stating whom you want to receive something of yours, what you want them to receive, and when they are to receive it. You will, of course, want this to happen with the least amount paid in taxes, legal fees, and court costs.

That is estate planning—making a plan in advance and naming whom you want to receive the things you own after you die.

Do you have an estate plan? A basic estate plan is an important financial document for everyone to have, whether you think you need one or not, and here's why:

Whether you like it or not, you need an estate plan. The state has a plan if you don't get around to writing a will or designing a plan of your own.

An estate plan entails the accumulation, conservation, and distribution of assets in an estate. A good plan will enhance and maintain the financial security of individuals and their families.

Wills

A will is a personal declaration of your intentions about the disposition of your property at death. Everybody should have one.

Because a will does not become legally enforceable until your death, it may be changed at any time before the maker's, or testator's, death or mental incompetence. A properly drafted will contains instructions for your personal representative, the executor. The executor is responsible for administering your estate.

A will offers many advantages, enabling you to control, to a large extent, what happens after you're gone.

With a will you can choose the executor, designate a guardian for minor children or others unable to fully care for themselves, distribute your property to beneficiaries you choose, be generous to charity at death, minimize estate tax, and have a sense of peace of mind, knowing that your assets will be distributed as you wish.

Trusts

Trusts involve the transfer of your property to an individual or corporate trustee who manages the assets within the trust's control for the benefit of one or more others — the beneficiaries.

Gift Tax

Gifts are gratuitous transfers you make during your lifetime. The annual gift tax exclusion is a silver lining that the gift tax rules allow. In 2018, you can annually make as many gifts of $15,000 to as many recipients as you can afford without those gifts even being a blip on the gift tax screen. [2] These lifetime gratuitous transfers are completely gift tax-free. The amount is periodically adjusted for inflation.

In addition, if in 2018 you "gift-split" with your spouse, $30,000 can pass to each child, grandchild or any other person you choose. [3] The recipients don't have to be related to you. Some people have referred to an annual exclusion gifting program as "the poor man's estate plan," because it effectively reduces the value of your estate without any interference from Uncle Sam.

IMPORTANT DISCLOSURES

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.

Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC