If you’re like most Americans, you probably think that estate planning is important. After all, nearly three-fourths of survey respondents agreed that having a will in place is a good idea. However, it turns out that taking steps to set up your estate plan might be even more important than you realize.
According to the same survey, only 32% of respondents said they had documents in place to ensure their wishes were carried out when they die or become incapacitated. But many people don’t understand the importance of a will: A recent poll showed that about half of all respondents think their assets would go to their family members “by default” or automatically if they don’t have an estate plan in place. Even by just drafting a simple will and assigning beneficiaries to your accounts — may help save your family time and money down the road.
Estate Related Expenses
You don’t want to think about your death, but if you don’t plan for it, your family might have to deal with a lot of extra costs.
When you die, your assets will be distributed according to the terms of your last will. If there are no challenges, this process is called probate. The probate process can cost 3% to 7% or more of the total estate value if there are many assets that need to be appraised and/or sold.
- Estate taxes: In 2021, the federal estate tax generally applies when a person’s assets exceed $11.7 million at their time of death. Some states have their own estate taxes, too.
- Inheritance taxes: A handful of states have inheritance taxes. Luckily, Nevada does not!
- Income taxes: If you’ve set up a trust that generates income and distributes it to others (like children), those who are receiving distributions may have to pay income tax on them!
Ways to Prevent Unwanted Fees for Your Heirs
Creating a Will
One of the most important things you can do for your loved ones is to plan for the future. When you die and leave an estate, there are a lot of things that have to happen. The estate has to be distributed, debts have to be paid, and taxes have to be filed. If you don’t have a will or other estate planning documents in place, this can cause a lot of unnecessary stress and expense. You could even see your family members argue over who gets what — and litigate the issue in court!
But if you’ve done some planning ahead of time, it may not even come to that. You can avoid potential disputes by having a will written out specifying how your assets should be distributed after your death. This also helps ensure that everyone gets what they deserve and that no one gets more than their fair share.
A will can help avoid unnecessary costs by clearly outlining which assets will be bequeathed to specific beneficiaries — and it does so in an organized way that makes sense for the law firms involved in administering your estate (or the courts). This provides clarity, which means less time spent on legal fees and court costs as well as less stress on those left behind after your passing.
Updating Your Beneficiaries Accordingly
Life can be a lot of things. It can be exciting and adventurous, it can be stressful and overwhelming, it can be fulfilling and rewarding. But one thing life is not? Predictable.
That’s why it’s so important to make sure that your beneficiary designations are up-to-date and in line with your wishes at all times. Beneficiaries can be designated on insurance policies or retirement plans, and failure to designate could mean lots of expenses for your loved ones down the line.
Beneficiary designation forms and payable-on-death forms should be checked annually and updated for life events like marriage or divorce — and for important life changes like getting married or divorced or having children/grandchildren. If you don’t update these forms in a timely manner, your money could go to the wrong person, or your family could go to the probate court, costing them more money than necessary when they’re trying to sort out your estate after you’ve passed away.
Mitigate Future Tax Burdens by Converting Retirement Accounts to a Roth Account
Traditional retirement accounts are great for many reasons. You can put money away for the future, and you won’t have to pay taxes on the funds until later. But what happens when you pass those traditional accounts on to your heirs? They could end up with a large tax bill since they inherit the tax liability.
With a Roth account, you pay taxes on your savings now (and potentially eliminate the future tax bill) as long as your financial situation is solid. This can be especially beneficial if you want to pass along a legacy of wealth or if you’re worried about passing along too much debt.
If your financial situation isn’t solid, speak to an estate planning attorney or tax attorney to learn what’s best for you
Set Up a Trust
When you create a trust, you’re deciding who will manage your estate after you die. You can also decide when certain people will get access to your assets, depending on what kind of trust you set up. You can even make sure that they’ll receive the money or property that’s in the trust when they need it most.
That’s why creating a trust is such an important part of your estate plan. The right trust can help ensure that your loved ones are taken care of — and it can also make sure that they will be able to enjoy their inheritance while they’re still alive.
The Importance of Working With Estate Professionals
If you haven’t already, it’s time to start thinking about your estate plan. We know that this can be a difficult topic, but we’re here to help.
In Nevada, there is no gift tax or inheritance tax to worry about. However, this doesn’t mean that there aren’t still ways you can set your loved ones up for success in the future. It’s important to have a sound estate plan in place, and Kalicki Collier Reno Probate Attorneys can help you make sure your assets are protected and distributed according to your wishes.
We can help you minimize tax responsibility, create a will, trust, and name beneficiaries. We’ll do all of this while giving you peace of mind knowing that when it comes time for distribution of your assets and liabilities, everything will be taken care of — and if it isn’t, we’ll make sure someone else does!
The best part? When it comes time to give back to your community or family members who need financial assistance, they’ll be more than happy to accept because they won’t have any other option! Working with a professional is an important step in creating a solid estate plan — no matter what state you’re in.
We hope this article helps you understand the role that estate planning can play in your life. Creating generational wealth is incredibly important for the success, health, and happiness of future generations. The more you understand about your estate plan, the better off you’ll be.
Kalicki Collier wants to help you solidify generational wealth by making sure that your assets are protected and that your wishes are followed. We know how hard it can be to plan for the future when you’re dealing with so much uncertainty today — but we also believe that it’s worth it. That’s why we’ve dedicated ourselves to helping clients like you make their plans for tomorrow as secure as possible.
If you’re looking for an estate or probate attorney in Reno, contact Kalicki Collier today!