Let’s face it: nobody wants to reflect on their own mortality. Preparing for the end of life can be a difficult process, but that doesn’t make it any less important. We’ll discuss the basics of estate planning in florida.
Estate planning is crucial for protecting your wishes and transferring your assets after you die. Despite its importance, estate planning falls on the back burner for many Americans. Only 18 percent of people over 55 have all of the recommended legacy plan essentials intact. Though it may seem overwhelming, estate planning can be an easy process with proper guidance. Here’s what you need to know to get your affairs in order and move forward with an estate plan.
What is Estate Planning?
Many people equate the words “estate planning” with signing a will. While wills are certainly important documents, they aren’t the only piece of the puzzle. Estate planning is the process of creating a strategy to distribute your estate. It covers not only the assets that get transferred but also the recipients, the timeline, and the process by which it will occur. Estate planning can be integrated into other long-term plans such as your investments, savings, and retirement funds in order to preserve your assets.
What are the key elements of Estate Planning?
Here are some of the most important documents to consider when making a plan for your estate.
Last Will and Testament
In many situations, this legal document will cover a majority of estate planning needs. It allows you to control how your estate is distributed after your death. You can identify your beneficiaries, select a legal guardian for your children, and choose an executor for your estate.
This is a legal agreement that allows a third party to hold and direct assets. Trusts go into effect while you’re living and can even serve as a will in the absence of one. These are commonly used for larger estates to avoid taxes, creditors, and probate.
Also known as living wills, advanced directives establish your preferences for medical care should you be unable to make decisions for yourself. They outline your wishes for end of life care should you become terminally ill, seriously injured, or comatose.
Power of Attorney
This type of advanced directive authorizes someone to represent you or act on your behalf. It gives the beneficiary the ability to make legal decisions regarding things like property, finances, and medical affairs.
What are the Benefits of Implementing an Estate Plan?
Being proactive about estate planning has many benefits for you and your family. A well-built estate plan puts more money into the pockets of your beneficiaries and out of the hands of the courts. Without a last will and testament, the courts will turn to probate to establish your will. Probate is a long and costly process that can easily exceed $10,000 in fees. Not only does probate leave less money for your beneficiaries, but it can result in decisions that do not align with your wishes.
Additionally, estate plans ensure that you prepare your family for your passing. You can set specific guidelines, such as distributing funds for long-term living and funerals. Estate planning is an essential step in providing for your children. You can name a guardian and create a minor’s trust to hold and pass assets on to your child. You can also create a trustee or someone who will handle these assets and manage decisions until your child comes of age. People also use estate plans to distribute charitable gifts, to name a successor for their business, and to limit disputes over their estates.
Your estate may have to pay taxes in order to distribute your assets to beneficiaries. The estate tax is a tax invoked on the transfer of property. It includes everything in an estate including cash, trusts, annuities, homes, insurance, and more. The government uses the fair market value for items to determine the value of a gross estate. If the value of your gross estate exceeds the exemption amount set by the federal government, you’ll have to pay an estate tax. The estate tax rate can be up to 40%.
Fortunately, most people don’t have to worry about paying any estate tax. The exemption level has been gradually climbing since 2001. In 2020, filing is only required for estates with combined gross assets exceeding $11.58 million. You can use IRS Form 706 to figure out the value of your assets minus deductions. In some states, there are additional estate taxes imposed on people who meet designated asset levels. Many of these states have lower asset thresholds for exemptions than the federal government. 12 states and Washington D.C. have state imposed estate taxes. Florida does not have any such laws. It’s worth noting there are other end of life taxes such as final income taxes and inheritance taxes for beneficiaries.
Estate Planning Options
There are two options when it comes to estate planning: hiring an attorney or doing it yourself. Why would someone choose to do estate planning on their own? It boils down to money. Many people choose to plan their own estate by filling out kits and documents they find on the internet. It is important to know that estate planning is not a one-size-fits-all kind of transaction.
In many cases, hiring an estate planning attorney is a crucial step in getting your affairs in order. Since estate planning documents are legally binding, every word must be carefully written to avoid mistakes. Minor mistakes can result in major financial ramifications for your beneficiaries. Estate attorneys have the knowledge to help you prepare these documents. They can work to protect your assets, streamline the process, and help you navigate the best options to minimize the burden of estate taxes and fees for your beneficiaries. Experienced estate attorneys will navigate complex systems and customize your estate plan to your specific goals.
If you’re ready to start estate planning, we’re here to help. Our knowledgeable attorneys will take the headache out of the estate planning process and work to protect your estate. If you’re ready to discuss your estate planning options, contact us today. Feel free to call us at (904) 236-5317.