By Brandon Miller, CFP–
Did you know that October is Estate Planning Awareness month as well as LGBTQ+ History month? Well, now you do. I think we collectively have a pretty good handle on our gay history but I doubt each of us has all of our ducks in a row when it comes to estate planning. In fact, studies show that up to 68% of Americans may have no estate plan at all.
While it may feel a little spooky to think about, creating a legally binding plan to distribute your assets after your death can ultimately provide you with peace of mind. You can rest easy knowing that your wishes will be carried out as you have requested.
Also, doing it now may save you or your heirs, as the end of favorable estate plan provisions of the 2017 Tax Cuts and Jobs Act is on the horizon. Under current tax laws, in 2026, the estate plan landscape is scheduled to shift, lowering the federal estate exemption to about half of what it currently is, the generous 12.92 million enacted in 2017.
Folks often think that estate planning is just for the rich but that simply isn’t the case. Having an outline of how to honor your wishes helps you and your loved ones. Well, my people know what I want, you think. Maybe. But in a time of crisis or grief do you really want to leave things to chance, risk siblings squabbling or contentious custody discussions?
It is crucial that your estate plan meets your state’s legal requirements to ensure your final wishes are honored, so expert help is recommended. There are also tools online to help with this. Consult with an estate planning attorney to ensure that documents are correctly prepared, avoiding potentially costly and time-consuming missteps.
Even if you aren’t ready to make it official-official, spending some time reviewing the basic needs can help pull your thoughts together.
Estate Planning 101
1. What do you want to accomplish?
Will you be providing for children under 18? Or are your beneficiaries young adults, older adults, relatives, or charities? Exactly how might you provide for your children?Options you may consider include a trust and/or a will.
What is a trust?Trusts provide control over the distribution of assets, privacy, and potential tax advantages. A trust is a fiduciary arrangement that allows a trustee to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways, specifying exactly how and when the assets pass to the heirs.
For example, are you concerned that a young adult might fritter away his or her inheritance? A spendthrift trust might be the answer. Instead of an account that allows immediate access to the assets, the trustee of a spendthrift trust dispenses the assets over time.
Additionally, a spendthrift trust typically protects assets from creditors, bankruptcy, divorce, and lawsuits.
Is there a need to minimize taxes? An irrevocable trust might fit into your plan. By placing assets into an irrevocable trust, the estate’s value is reduced regarding estate taxes. Besides tax considerations, irrevocable trusts also help protect assets in lawsuits.
You may also decide to create a living trust, which transfers your assets to your beneficiaries and avoids probate.Other trusts that you may find advantageous include charitable trusts, special needs trusts, generation-skipping trusts, and bypass trusts. The latter two offer ways to reduce the estate tax.
You may also consider a will. A will is a legal document that takes effect upon your death. It outlines your wishes, including provisions for guardianship of your minor children.
2. Have you taken stock of your possessions?
It’s important to create an inventory of your assets, such as bank accounts, insurance policies, investment accounts, and personal belongings. This also needs refreshing every now and then!
3. Don’t avoid the difficult conversation.
If you were to pass away suddenly, do your loved ones have access to important documents, financial statements, etc.? It is important to inform your loved ones about the location of your will and the legal professionals who will handle the process.In other words, it’s important to ensure that your heirs won’t be forced to embark on an unexpected scavenger hunt in the event of your unexpected passing.
4. Choose the right executor or trustee.
Select a trustworthy individual or institution to act on your behalf. You need someone dependable, trustworthy, organized, fair, and financially savvy. There are also professionals, called Fiduciaries, who can step in if you need an outside party.
5. Be sure to designate and regularly update your beneficiaries.
It’s common to list a beneficiary or beneficiaries for an IRA and life insurance policy.However, it’s crucial to ensure that your designated beneficiaries align with your will. For instance, if the will you drafted last year names Bob as the recipient of your IRA at ABC Brokerage, but the beneficiary listed 15 years ago is Sally, Sally will be the recipient of the assets. Yay for Sally but boo-hiss for Bob. Make sure you update these details as the Sallys drift out of your life to make way for the Bobs.
6. Prepare for medical decisions.
Estate planning isn’t complete unless you prepare legal documents such as a durable power of attorney for financial matters and a medical power of attorney for medical decisions. It is crucial in the event you are incapacitated.These documents appoint trusted individuals to make decisions on your behalf when you can’t.
7. Update your estate plan regularly.
Life is full of unexpected turns. Milestone events such as marriage, divorce, births, and deaths can significantly impact your wishes and create gaps in your plan.We recommend a set review every five years so you can make necessary adjustments to your plan.
Estate planning is an intimate process, and these are just the basics. Something is better than nothing so scribble it on a cocktail napkin or engage with an attorney. Make a plan, or if you have one, make sure it still suits your needs today.
Brio does not provide tax or legal advice, and nothing contained in these materials should be taken as such. The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.
Brio Financial Group is a registered investment adviser. SEC Registration does not constitute an endorsement of Brio by the SEC nor does it indicate that Brio has attained a particular level of skill or ability. Advisory services are only offered to clients or prospective clients where Brio Financial Group and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Brio Financial Group unless a client service agreement is in place.
Brandon Miller, CFP®, is a financial consultant at Brio Financial Group in San Francisco, specializing in helping LGBT individuals and families plan and achieve their financial goals. For more information: https://www.briofg.com/
Money Matters
Published on October 19, 2023
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