Our firm frequently advises on clients on matters of Estate Planning. One of the most important questions is whether a client needs a Simple Will, a Will with a Support Trust, or a Revocable Living Trust.
Estate Planning Seminar
Estate planning and same-sex marriage considerations
Since the Supreme Court's recent landmark decision legalizing same-sex marriage across the nation, Florida residents in same-sex relationships may want to consider some important estate planning factors. Doing so can help couples to take advantage of some of the benefits to which they are now entitled, allowing for the easy passing of their estates to the surviving spouse.
A primary consideration for those who are living together, are in civil unions or are in domestic partnerships with their same-sex partners is whether to get married. Doing so will allow people to reap the advantages inherent in the marriage deduction, potentially saving thousands on their taxes. The marital deduction extends beyond normal tax returns, as it also applies in an unlimited basis to estate taxes. All property left to a surviving spouse is exempt from federal estate tax, even if the value exceeds the estate tax exemption amount.
Estate planning and end-of-life care
Retirees flock to Florida to get away from cold climates in their golden years, but eventually most will have to cope with a decline in health. An estate plan can be an essential part of financial planning for the elderly and address much more than who inherits assets. Financial experts recommend that estate plans address how assets will be used for long-term care. Additionally, a medical directive should be prepared that assigns someone to make health care decisions if a person becomes incapacitated.
Planning for the possibility of long-term care in the final years of life could allow a person to designate wishes like the desire for in-home care instead of nursing home care. To pay for in-home care, the estate plan could earmark assets for that purpose. Alternatively, if a person elects to accept living in a nursing home, then the cost of that service could be addressed as well.
Steps to ensure a proper will
As Florida residents may know, having a current will in place is an important part of estate planning. However, some individuals may not realize that certain tasks must be completed to ensure that a will does not cause problems for beneficiaries in the future.
Wills do not necessarily include everything that you own. For individuals who have a property owned in joint tenancy where the survivor inherits the property after the other individual dies, the surviving co-owner receives the property. This is true even if the will leaves the property to a different beneficiary. The same can be said for accounts such as insurance policies where a beneficiary has been designated.
Digital assets and estate planning considerations
Florida residents establish their digital footprint when they create social media profiles, purchase items online and post entries on a blog. However, not accounting for these digital assets can potentially cause issues after a person's death.
Digital assets comprise the information that individuals record and store in an electronic format. They encompass such things as personal photos, email correspondence and social networks. While these assets may not be worth much on a monetary level, the misappropriation of them can cause significant risks. As more people use digital information and assets, these need to be accounted for in estate planning. Failing to consider digital assets can result in online fraud and theft. Business executives expose their employers to a greater degree of risk if they leave their digital information uncensored and easily available. Likewise, the owner of a small business may find trade secrets stolen if emails are obtained.
The importance of a spouse in estate planning
Most people in Florida who are contemplating the preparation of their will know that part of the task is to appoint an executor to carry out the will's provisions. Many legal and financial professionals believe that the spouse of the testator can be an ideal choice, for a variety of reasons.
A spouse will often have superior knowledge about the couple's assets and the express and implied wishes and desires of the testator. As the executor, the spouse may be in a better position to track the location of assets and financial documents relating to them. The spouse will also be required to perform the normal duties of an executor, including the payment of all outstanding bills and ensuring the smooth and timely distribution of the decedent's assets to the named beneficiaries.
How gifts can be used for estate planning
Florida residents who would like to avoid federal taxes on their estate may want to consider giving regular gifts to their loved ones. For people with large estates, strategic gifting can be an important part of an estate plan. Wealthy individuals may be able to use the annual gift tax exclusion to reduce the size of their estate before they die.
Before giving monetary gifts to loved ones, it is important to know the annual limits on tax-free gifting. Every year, a single person may give individual gifts of no more than $14,000 each without having to pay any gift tax. A married couple can combine their annual tax-free gift allowances and give gifts of $28,000 or less.
Executor responsibilities detailed
A Florida resident who is named as the executor of a decedent's will may be apprehensive about the responsibilities that accompany that position. The executor needs to make sure the desires of the deceased person are fulfilled and the remaining financial obligations of the person's estate are taken care of.
Perhaps the easiest activity is making sure a final income tax return is filed for the deceased. In addition, if the decedent was collecting Social Security benefits, the executor must notify the Social Security Administration of the death. Canceling credit cards and closing bank accounts could also be the responsibility of the executor.
Estate planning changes along with tax changes
Florida residents who have large estates are likely aware that over the last decade, there have been changes to federal estate tax exemptions and capital gains rates that may change how they want to approach their estate planning. Capital gains tax rates have gone up from 15 percent to 24 percent, while the federal estate tax exemption rose from $1.5 million to $5.43 million between 2004 and 2015.
This means that while gifts to family members while an individual was still alive used to be a smart method of avoiding estate tax, it is no longer necessary. Furthermore, such gifts may come with a hefty capital gains attached now.
Using a trust to hold a life insurance policy
Naming a trust as the beneficiary of a life insurance policy can be a wise decision in some situations. Although many people name a person as the beneficiary of their life insurance policy, using a trust instead can be helpful for Florida families with large estates, financially irresponsible heirs or special needs children.
One option that a person has while planning their estate is to set up an irrevocable life insurance trust. By placing life insurance in a trust, the value of the policy is effectively held outside of the benefactor's estate. When beneficiaries begin receiving funds from the trust, they will not be obligated to pay any estate or inheritance taxes on the value of the trust.
