4 Estate Planning Tips for Keeping Your Money in Your Family

 Posted on August 14, 2020 in Estate Planning

Make no mistake about it, estate planning is not just for the excessively wealthy. Anyone—even those with smaller estates—can have their assets eaten up by various types of taxes and other obligations, especially if the items being passed down have appreciated greatly since they were acquired. However, there are some solutions that could allow you to keep more of your money within your family regardless of the current tax laws.

Tip #1: Check and Update Beneficiaries Frequently

It is surprising just how many people end up having no beneficiary or a previous spouse listed on life insurance policies, investment accounts, and even their wills. To an extent, it is understandable—life is busy, things change often, and before you know it, years have passed and you still have not gotten around to updating your beneficiaries.

Unfortunately, if you pass away while your accounts or policies are still in limbo, your assets will go to probate as “intestate.” This time-consuming and expensive process can very quickly eat up your assets and leave a much smaller estate for your loved ones than you had hoped. To make sure this does not happen, review your beneficiary information after any major life event, including the birth of children, marriage, or a divorce.

Tip #2: Use Trusts

If you happen to have a sizeable estate and are concerned about protecting your assets, you may wish to set up a trust. Trusts can be set up in several ways, but irrevocable trusts typically have the best tax benefits. Assets that are placed in a trust no longer belong to you, but to the trust itself. In many cases, this puts the assets out of the reach of estate taxes, and sometimes, even creditors. Of course, you can still create stipulations on how it is used, and money from it can be distributed while you are still alive. However, trusts can be—and typically are—quite complex, and it is helpful to work closely with an attorney who is experienced in the creation of effective trusts.

Tip #3: Examine Your Options Carefully

There is more than one way to pass assets down to an heir, so before you decide on any particular method, you need to carefully explore your options. Direct gifts can lead to hefty tax penalties, especially when an item is high in value or has greatly appreciated. A “step-up in basis” might be the way to go, but it is important to remember that, sometimes, assets may step down instead.

It is also important to keep in mind that different tax rules apply to different assets. For example, 401Ks and IRAs are taxed differently than Roth accounts. This leads us to our final and most crucial tip:

Tip #4: Work With a Lombard, IL Estate Planning Attorney

While it is a good idea to do research on your own regarding your options for minimizing tax obligations in your estate plan, there is no replacing the experience and knowledge of a skilled attorney. Your lawyer will sit down with you to gain a full understanding of your financial situation. From there, the attorney will develop a comprehensive estate plan customized to meet your unique needs. To get started, contact a knowledgeable DuPage County estate planning lawyer at A. Traub & Associates. Call us today at 630-426-0196 to schedule your initial consultation.

Sources:
https://money.usnews.com/money/retirement/articles/2015/11/19/5-estate-planning-strategies-to-keep-your-money-in-the-family
https://www.saverlife.org/money-101/keep-it-in-the-family-how-to-pass-on-money-and-assets-to-family-members