Lifetime estate planning is a topic some people do not want to face. While facing mortality is daunting, it is important to know what is involved with lifetime estate planning and the options available for estate planning. It is also important to consider how lifetime estate planning may relate to being incapacitated. Having a good estate planning attorney in Amarillo, Texas to walk you through all available options can be very helpful.
What is involved with lifetime estate planning?
Estate planning allows people to put their wishes into a legally binding form. This type of planning helps avoid some of the issues that often arise after someone passes away. Lifetime estate planning helps those who are left behind to know exactly what their loved one wanted. Estate planning can also help family members avoid getting the courts involved with end-of-life and probate decisions.
Estate planning requires an individual to think about the end of their life. Someone who is planning their estate needs to consider what needs to happen if he or she cannot make medical decisions anymore. The person should also consider how bills are going to be paid and how their assets should be divided after they have passed. If minor children are involved, the person should consider guardianship decisions in their plans. Planning in this manner is not easy to do, but it is necessary for managing both the expected and unexpected events in life.
Options for lifetime estate planning
The most basic document involved with lifetime estate planning is a last will and testament. Wills can be simple or complex documents, depending on an individual’s circumstances. A simple will includes identifying information about yourself, names your beneficiaries, and includes the person you want to act as executor of the will. A will outlines who you want to appoint as a guardian over your children and also indicates how you want your assets divided.
A tax-planned will is more complicated than a simple one. This kind of will involves planning so that the tax burden on a spouse and other survivors is minimal. Someone that has a substantial estate may be subject to estate taxes if proper planning is executed. A tax-planned will usually involves setting up trusts and gifting assets prior to passing away.
Another option one can choose during lifetime estate planning is a revocable trust or an irrevocable trust. At its most basic level, a trust is a relationship where property is held by one party for the benefit of another. When it comes to estate planning, a trust involves transferring assets to a third party, who will hold those assets on behalf of the trust’s beneficiaries.
Trusts come in two general forms, which are known as revocable and irrevocable. A revocable trust means that, under certain circumstances, the person who created the trust can revoke it, and retrieve the assets, at some point before death. An irrevocable trust acts in the opposite manner. Once the assets are transferred into the irrevocable trust, it is a permanent transaction.
Another option for avoiding estate taxes during estate planning is setting up a gifting program. The IRS allows an individual to gift another person a certain amount each year. In 2015, that limit was $14,000. The IRS also has limitations on how much money a single individual can gift over a lifetime without involving estate taxes. In 2015, that upper limit was $5.43 million. So, if a person dies in 2015, and has gifted a total of $6.0 million over his or her lifetime, the estate will owe 40 percent in taxes on the $0.57 million that went over that limit.
Lifetime estate planning and being incapacitated
People often fall ill or are involved in an accident unexpectedly. If someone cannot make decisions on his or her own anymore, who will make those decisions? At this point in time, durable financial and medical powers of attorney come into play.
A durable power of attorney allows one individual to make decisions for another who has become incapacitated. Financial powers of attorney allow the trusted individual to use assets to pay bills, collect benefits, file taxes, or operate a business. Medical powers of attorney allow the trusted individual to make medical decisions.
Another document to add to estate planning in the event a person becomes incapacitated is advanced care directives. This legal document outlines the kind of medical care the incapacitated individual would approve or disapprove of.
The importance of good estate planning attorneys
Wills, trusts, and powers of attorney are just a few of the documents you will want to create while you planning your estate. You also need good estate planning attorneys in Amarillo, Texas. It is a mistake to try to create and execute any estate planning documents without the advice and guidance of an experienced estate planning attorney. The laws surrounding end-of-life, probate, inheritance, and taxes are extremely complicated. Amarillo attorneys can offer you advice regarding the estate, generation-skipping, inheritance, and gift tax implications of your plan, among other factors.
If you have questions about lifetime estate planning, call the experienced attorneys at Sprouse Shrader Smith at (806) 468 3300. You can also Contact Us using our contact form or stop by our offices at 701 S. Taylor Street, Suite 500, in Amarillo, Texas.