Keep It Legal

When you hear the word “estate” the image of Downton Abbey might pop into your head. You might think of Earls and Dutchesses. You might think about the kind of money that means great-grandchildren can spend the rest of their lives popping bottles on a yacht in the Mediterranean.

If you have $5 and a relative, you have an estate. If you have an estate, you need an estate plan. Part of an estate plan deals with what happens to your assets after you die. However, a comprehensive estate plan also deals with what happens while you’re alive, but you can’t sign your own name or talk to your own doctors. It can also deal with succession planning for your business or making sure your specialized collections or equipment are properly evaluated.

One of the best tools for comprehensive estate planning is a trust. Again, when you hear “trust” you might think of one of those kids who park their boats inside their parents’ yacht off their grandparents’ private islands. Those folks need a specific type of trust because they have a “taxable estate.” Right now, a taxable estate means having total assets worth about $24 million for a married couple. If a married couple gives away less than about $24 million total after they’ve both passed away, they’re below the “estate tax cap” and no estate tax will be due by their beneficiaries.

Less than 1percent of Americans pay any estate taxes, so the primary focus for us non-yacht-owners should be non-taxable objectives like making sure that it’s easy for our loved ones to take care of us as we age and easy for them to transfer our assets after our death.

Soon, you’ll start hearing rumblings from Washington D.C. about the estate tax “sunset” that could happen in 2025. In 2025, the tax law changes from 2001 regarding the estate tax cap is set to expire. There will likely be plenty of political volleying regarding the possible sunset. Even if the law expires because Congress does nothing to either renew or revise the law, the estate tax cap will still be somewhere around about $7 million or $14 million for a single person or couple, respectively.

So, if you and your spouse’s estate isn’t in danger of being anywhere near the $14 million category much less the $24 million category, your main focus for comprehensive estate planning doesn’t really need to be hiding your Picassos in a private aircraft hanger in the Caymans. It would probably be more beneficial for you to make sure that you have the proper elections on your power of attorney and valid beneficiary designations on your 401k.