Top tips for estate planning success

Some basic estate planning tips are beneficial even though the laws governing this area of law can change on an annual basis.

Estate planning is an essential step towards future financial security. In addition to reducing the risk of confusion on how assets should be distributed, taking the time to put together an estate plan can also provide an opportunity to review your current financial situation. Upon review, you may realize that it is beneficial to take advantage of various legal tools that are available to reduce tax obligations.

Whether looking to maximize the amount of assets passed on to future generations or just attempting to get all of your assets organized to have a better understanding of where you stand financially, it is important to keep in mind that the rules governing estate taxes can change on an annual basis. Even during these fluctuations, it is important to be aware of the following basic estate planning tips:

  • Basic Documents. A basic estate plan, at a minimum, has a Will that directs the disposition of assets upon death. A more complicated estate plan may use a trust if there is a specific need for such a document.
  • Estate-tax exemption. A recent Market Watch article discussed some of the most basic tips to take advantage of when putting together an estate plan. The article listed the estate-tax exemption as one of the top estate planning benefits. This exemption allows the transfer of the decedent's assets to another without charging a tax. The amount allowed can vary, and the IRS reports that it is currently set at $5.43 million.
  • Gift-tax exemption. Another important exemption, the gift-tax exemption, allows individuals to give gifts during their lifetime without having to pay a tax on the transfer. The IRS reports the rate for 2013 - 2015 is $14,000. This rate applies for each individual making the gift, meaning a couple could transfer up to $28,000 in assets every year to children, grandchildren and loved ones without penalty.
  • Designations. Beneficiary designations are present on a variety of accounts, including life insurance policies and retirement plans. These designations are helpful because they allow the transfer of the decedent's asset automatically, without the need for probate. However, it is important for the owner of these assets to update the designation with major life events. This helps to better ensure the assets go to the intended beneficiary and not, for example, an ex-spouse.

As noted above, the laws governing estate plans are constantly evolving. Although these basic tips are generally beneficial regardless of changes in legislation, those who are in the process of putting together an estate plan or are reviewing their current plan are wise to seek the counsel of an experienced estate administration lawyer. This legal professional can review your plan and better ensure it meets your needs.

Keywords: estate planning