As of January 1, 2018, The Tax Cuts and Jobs Act doubled the federal estate tax exemption to $11.18 million for individuals and $22.36 million for married couples. This new tax law has left many people asking the question, “Do I still need an estate plan?” Even though you may not be facing any wealth transfer tax upon your death, the answer is definitely, “Yes!” Regardless of the estate tax rules or size of your wealth, we believe everyone needs an estate plan.
An estate plan ensures the proper and timely distribution of assets to your named beneficiaries, according to your wishes. If you do not have a plan with someone in charge of your asset transfers, the court will step in and take control of the process. With a judge involved, this process could take years. Additionally, if you do not have designated beneficiaries, the family or friends you want to receive assets may be overlooked and assets given to other people due to the probate laws and the court rules.
If you have family or friends as direct beneficiaries of your assets, as with payable-on-death accounts or joint ownership, the assets will not be protected from creditors. For example, your son or daughter may be anticipating a divorce. However, their spouse may have access to your child’s money received from your estate if it is received prior to the divorce. If that money remains in a trust for your child’s benefit, the assets can be protected from the spouse. Alternatively, the child or other family member may be a spendthrift themselves. Keeping their assets in trust and naming an independent trustee is one way to ensure the assets you have accumulated over your lifetime will not be spent frivolously.
On another note, you may want to leave assets not only to your children, but future generations as well. Trusts can be structured in such a way as to distribute income throughout multiple generations if they are managed properly. You can determine who receives income or principal distributions and for what reasons, if your trust is carefully drafted. The language in the trust can be flexible or strict, depending on the limitations you want placed on your beneficiaries.
Every situation and family are different, but these are just a few reasons you may need an estate plan, even though you will not have an estate tax. With an estate plan, you determine the flow of assets to your beneficiaries. Without one, your family may be left at the mercy of the court.
By Virginia Cabai
Senior Vice President & Private Wealth Advisor
Additional articles from this issue:
2018 Third Quarter Review and Commentary
Download Full Newsletter Here
