The Complexities of Estate Planning and your Legacy

Talking to your family or trusted friends about what happens after you pass away can often feel uncomfortable or awkward, especially if you have never approached your wealth plans with them before. As critical as it is to have a written estate plan, it is just as important to communicate your plan and wishes in person.

One of the foundational goals of an estate plan is to adequately convey your exact postmortem desires.

Think of your plan as a peaceful transition of your lasting legacy. While everything within the plan might make sense to you, it is imperative to discuss and provide meaningful education to your family as to why things are designed as such. We encourage choosing a neutral time and place, ideally when there is no pressing business, and everyone is at ease. You can start by identifying your durable/medical power of attorney, executor, and trustee(s), and talking to everyone about their specific roles and responsibilities. Likewise, we believe it is important to identify individuals responsible for your disposition of remains, any guardians for minors or other individuals who require a guardian, and any designated beneficiaries or heirs. We believe transparency is paramount when navigating the complexities of estate planning. Providing an outline of your goals, especially regarding your legacy, can prevent future misunderstandings and unwanted feelings of ill-will towards those you love.

Estate planning revolves around death, which is a prime reason most individuals do not take proper action. But with proper planning and thoughtful conversation, you and your family can smoothly solidify your legacy so that everyone can enjoy your earthly presence without fear of future developments.

Your estate plan is the legal guide to not only making your wishes known, but ensuring your wishes are enacted after you have passed away. Most individuals start by generating certain legal documents that identify a responsible individual to act either on your behalf or on your estate’s behalf. These documents can include a Last Will and Testament, Durable Power of Attorney, Medical Power of Attorney, Living Will, and Authorization for Release of Health Information Pursuant to HIPAA. It is also important to identify successors within each of your legal documents for circumstances where the responsible individual is unable or unwilling to act on your behalf. Another crucial step involves identifying all assets and items of worth, and ensuring beneficiaries are designated for all eligible assets. Certain assets do not pass through probate, such as retirement accounts, jointly owned transfer on death (TOD) accounts, and insurance policies. Some states allow for beneficiary deeds for real property. It is imperative to store any and all legal documents in a secure location that only you and your trusted individuals can access. Working in collaboration with a trusted financial advisor can help you navigate the complex process and identify potential pitfalls in your plan that might have a negative impact on your wishes and goals. A trusted advisor can also help structure your plan with certain tax and probate reduction strategies, which can include lifetime gifting, trusts, donor advised funds, and other advanced techniques.

If your goals include gifting assets during your lifetime, then understanding the current gifting environment and parameters is important for this goal. In 2024 you may give up to $18,000 per recipient without needing to file a gift tax return and without estate tax implications. In 2024 the basic exclusion for determining estate tax liability is $13,610,000. Broadly speaking, this means that $13,610,000 may pass to your heirs without being subject to estate tax. This amount is unified with the exemption of your lifetime gifts, meaning the $13,610,000 exemption applies whether you gift assets while living or upon your death. This exemption is on track to sunset at the end of 2025, which will vastly decrease the exemption amount starting in 2026. Monies or assets gifted to qualified charitable organizations qualify for a Charitable Contribution deduction if you itemize deductions (subject to limitations). Distributions from a retirement account paid directly to a qualified charitable organization are generally income tax-free. Certain types of trusts (i.e., Charitable Remainder Trust, Charitable Lead Trust, etc.) can help remove assets from your taxable estate. However, before gifting assets to grandchildren you should consider the Generation-Skipping Transfer Tax.

There are many viable avenues to ensure your gifting is done efficiently and effectively before or after you pass away, so understanding all the implications for the different options is important for the success of your plan.

Another item to consider is assets you might own that are hard to value, such as an ownership interest in a private company, a limited partnership, or receivables. Similarly, tangible assets to consider that are simply undividable can include art, collectibles, and antiques. We encourage individuals to consider the value of each portion of their estate that each heir is to receive and understand if any portion includes hard to value or undividable assets. If passed to heirs, these assets can create an imbalance of value transferred to each heir. Consultation with a trusted advisor can help guide the decision to either liquidate these types of assets while you are living and determine how to plan for capital gains taxes or include the assets in your legacy plan for heirs.

For business owners, there are a few questions to address while planning the succession of your business. Who will take your place and run the business once you have retired? If you have children in the business who will not be in a position of authority, this should be communicated to those individuals early and transparently. Would you be willing to sell your business if needed? Sometimes personal matters, health, or economics can force the business owner’s hand to sell, so having a succession plan outlined before can avoid costly mistakes. How do you intend to keep the business inside your family and transition ownership if you prematurely pass away? The business will remain, but only as long as a comprehensive plan is enacted, and successor individuals are designated. There are many needs of a business owner to run a business effectively, so utilizing a trusted advisor as a guide through the transition structure can enhance the legacy of the business for generations.

End-of-life healthcare can be accomplished in just about any manner you prefer. In-home care, assisted living facilities, or skilled nursing facilities are all available for you to be most comfortable. The budget for each type of care is drastically different, so it is important to understand the costs of Medicare, Medicare Supplements, and long-term care insurance. The other factor when planning for end-of-life care is identifying a trusted individual to make medical decisions on your behalf and specify your treatment plan in case of a terminal condition or persistent vegetative state. This trusted person must know your specific desires, understand their role in your life, and have a copy of the appropriate legal documents.

How would you like to be remembered? Your legacy will be passed on for generations through your family and loved ones, therefore it is crucial to involve your family members in your planning process in order to remove ambiguity surrounding your intentions and wishes. Often, disagreements within a family can be avoided with thoughtful planning and communication. As your trusted financial advisors, we encourage you to have these conversations with your family in a thoughtful and constructive manner. If you do not feel adequately equipped to handle the planning on your own, our team would be more than willing to help guide you and your family and help make the experience pleasant and your desires achievable.

If you do not feel adequately equipped to handle the planning on your own, our team would be happy to help guide you and your family while making the experience pleasant and your desires achievable.