Money Talks News’ recent article entitled “Why Everyone Needs an Estate Plan” reminds us that estate plans aren’t just for the wealthy. People of all ages and income levels can benefit from drafting a plan. An estate plan provides instructions about how you want to distribute your assets, how you’ll pay for your debts, final arrangements, and even your medical care if you become incapacitated.
With everything stated explicitly in a plan, your family can work through their grief after your death instead of battling each other about who gets what.
An estate plan describes your final wishes regarding how you intend your assets to transfer to your beneficiaries, such as your house, vehicle, bank accounts, investments, and valuables. Generally, you will include these instructions in your will. You’ll also name the executor of your estate in your will, a guardian for your minor children, and even someone to take care of your pets when you’re no longer here.
Many people will confuse an estate plan with a will. However, that’s just a part of a comprehensive plan. There is much more involved in an estate plan than just who gets what after you die. An estate plan can also include your wishes if you’re medically unable to manage your affairs. Your plan can designate your durable power of attorney (DPA), who can make medical and financial decisions in your stead, along with medical directives on what medical procedures you do or don’t want to prolong your life.
One of the most compelling reasons to have a plan is to help avoid probate and prevent your family from winding up in court to access the assets you’ve left behind for them. Another reason to have a plan is to help reduce any estate or inheritance taxes imposed on your estate when your assets transfer to your beneficiaries.
Federal estate taxes typically only apply to the very wealthy. In 2023, the threshold, or estate tax exemption, is $12.93 million.
Unless your assets exceed the applicable exemption in the year of death, you’re exempt from federal estate taxes. However, while you may be exempt from federal-level estate taxes, the state you live in may impose its own estate taxes. Some states also levy inheritance taxes on beneficiaries who receive assets from your estate.
Check with an experienced Austin estate planning attorney.
Reference: Money Talks News (Oct. 21, 2022) “Why Everyone Needs an Estate Plan” (https://www.moneytalksnews.com/5-things-you-must-do-when-your-savings-reach-100000/)
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