Estate Planning

For most people, transferring wealth to loved ones or a favorite charity is a long-term goal. Appropriate tax planning for your personal situation may help ensure you leave a legacy. Estate planning involves many strategies generally designed to preserve assets, minimize taxes, and distribute property according to your wishes.

If it has been awhile since you reviewed your estate plan, consider doing so, as the landscape of estate and gift planning is changing. Several changes in the SECURE Act, passed in December 2019 may materially affect estate planning and beneficiary decisions that were previously made in a effort to minimize Required Minimum Distributions (RMDs) to heirs and beneficiaries. It is also important to note that state estate tax laws may differ from Federal estate tax laws, and state estate tax laws may differ from state to state.

Federal regulations concerning the taxation of property owned at death contain a catch-all definition stating that the “gross estate of a decedent who was a citizen or resident of the United States at the time of his death includes the value of all property—whether real or personal, tangible or intangible, and wherever situated—beneficially owned by the decedent at the time of his death.” The first step in understanding the potential implications of the Federal estate tax is to know what major assets comprise your estate. Consider the following:

  • Personal assets, such as personal property, savings, real estate, retirement plans, and proceeds from your life insurance policies.
  • Rights to future income, such as payments under a deferred compensation agreement or partnership income continuation plan. These rights are commonly referred to as “income in respect of a decedent (IRD)” and may be includable at their present cash value.
  • Business interests, whether as a proprietor, a partner, or a corporate shareholder.

It is important to note, however, that the value of Social Security survivor benefits, received as either a lump sum or a monthly annuity, is not includable in your gross estate.

Determining what may be included in your gross estate may require professional, in-depth analysis. It is also important to re-evaluate your estate plan periodically to help protect your beneficiaries and heirs from having to choose between fulfilling your wishes and meeting estate tax requirements.

Failure to plan your estate not only has the potential to increase your heirs’ potential tax liability, but it also leaves responsibility to the state courts to divide your assets, assig n guardians for your children, and dictate all other details in handling your estate. Your involvement now can help you prepare for your loved ones’ future.