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What exactly is an estate plan and how different is it from a will? – this must be the very first question you might be having in your minds. Simply stated, a will is a precise document containing the information about the distribution of your property. On the other hand, an estate plan is way more than a simple will. It includes everything starting from the distribution of assets, legacy wishes and may also help you to cut down the taxes, court costs and other fees you may have to pay.
Now that you know about an estate plan, you now must be curious about what all you must know about while considering an estate plan. Let us walk you through 6 points of importance of estate planning.
Children
Birth of a child is considered one of the major events while framing an estate plan. Drafting a will or trust may be beneficial here which is followed by allocating a guardian and a conservator (Guardian of the estate) to handle responsibilities of assets related to a minor child. Another solution may be to distribute assets among a financial institution.
Size of estate or residence
If the size of the estate exceeds the state tax exclusion, each spouse will have $11.2 million federal estate tax exclusion. A well-organized estate plan will include provisions such as the exclusion of $22.4 million from federal estate taxes at the death of the first spouse.
Stretch Distributions
The accounts and beneficiary options for each account need to be considered while reviewing the location of retirement investments. Let us take an example of distribution from IRAs. These can be “stretched” so that they may last for an entire lifetime for the beneficiary. This can be substantial when the beneficiary is a child or grandchild to allow tax-deferred or tax-free growth for decades.
Privacy and Probate Issues
An estate plan is also important for minimizing the probate process, unnecessary delays, exorbitant expenses and the loss of privacy. For instance, the probate fees can be quite high even in the primary stages. It may take up to 5% of the total cost of an estate value.
Charity Goals
It might be a possibility that the estate consists of a considerable amount of assets and the owner may want to give it away to charity. Thus, a charity or a trust can also be named as a beneficiary in a will. For more information about this, the best option is to seek out an attorney or tax advisor to tell you about various charitable remainder trust (CRT).
Ideal succession of your business
Do you own a business? Have you planned it well as to what would be the future of your business after you pass away? You may want to keep all the assets within your family boundaries through family limited partnership or family limited liability company. There are many options to choose from and the best advisor here is again an attorney.
Now that you know about the importance of an estate plan, you might want to have one for yourself. It is time to seek out an attorney to help you out with your specific situation, folks!