Estate planning is the preparation of tasks that serve to manage an individual’s asset base in the event of incapacitation or death.
Anyone who owns assets, regardless of their size or value, should plan their estate. By planning your estate, you determine who will receive your assets upon your death or if you are incapacitated. The planning includes transferring assets to heirs and settling estate taxes. Most estate plans are set up with the help of an attorney experienced in estate law. In order to ensure the fulfillment of your wishes, it is important to choose who will manage your estate. It’s also crucial to identify and estimate the value of your assets when deciding who will receive them. Listed below is what to consider when planning your estate.
Tangible vs. Intangible Assets
Your tangible assets are your physical possessions. This includes property, such as a house or land; automobiles; coins, trading cards, and other collectibles; furniture, clothing, and other personal belongings.
Intangible assets, however, are not physical items, but financial accounts, for example. This includes checking and savings accounts; individual retirement accounts (IRAs) and 401(k)s; mutual funds, stocks, and bonds; policies that cover life insurance; business ownership; and a health savings account.
Calculating the Value of an Asset
After identifying your assets, you need to estimate their value. To assist with estate planning, recent appraisals of your real estate and financial statements of your accounts can be useful outside valuations. If you do not have these valuations, estimate the value of these items or how your heirs will value them so that you can divide your assets accordingly.
Estate Tax Planning
Before assets are distributed to beneficiaries, federal and state taxes can significantly reduce their value. The death of a family member can result in substantial tax liabilities, necessitating generational transfer strategies to reduce, eliminate, or postpone taxes.
Individuals and married couples can take significant steps to reduce the impact of these taxes during the estate planning process. Your estate planning attorney can advise you on strategies to mitigate estate taxes.
Estate Debts and Judgments
Remember to keep track of any unpaid debts or judgments you may have when planning your estate. Your estate has the right to collect repayment on a loan or judgment proceeds if you lent or won money.
If you’re looking to reach your financial goals, we’d love to help. Our team can help you plan for your ideal retirement or build wealth for future generations. Get in touch with us today to schedule an introductory consultation.