Estate Planning Protects Your Heirs from Unnecessary Expenses
Many people fail to engage in estate planning, because they assume it’s something only the super rich do. Indeed, unless you leave more than 5.43 million dollars in assets to your beneficiaries, they won’t have to worry about the federal estate tax. Further, currently California has no inheritance tax. But just because you aren’t a multi-millionaire, that’s no reason to skip estate planning! There are many other ways that solidifying your final wishes can protect your heirs from excessive fees and costs, unwanted court intervention, or costly delays in transferring assets.
State taxes. The federal estate tax, as mentioned above, only affects the very wealthy. But state taxes are an entirely different story. Depending upon your heirs’ state of residence, inheriting cash or property could trigger income taxes. It’s better to be safe than sorry, and put together a plan to pass on your assets while avoiding unnecessary taxes.
Other income taxes. Even if your beneficiaries don’t have to worry about the federal estate tax, they might have to worry about their own income taxes! When you pass on certain assets, such as qualified retirement plans, any recipient other than your spouse will be subject to income taxes on distributions from those funds. If annual distributions bump them up a tax bracket, they will be facing an additional burden during an already difficult time.
Luckily, there are ways to pass on your retirement fund and other types of assets that can be subject to income taxes, without triggering unnecessary expenses for your heirs. An estate planning attorney can explain these rules to you, and help you discover ways to transfer assets efficiently.
The costs of probate. Even if you aren’t worried about triggering excess taxes for your loved ones, you could inadvertently trigger attorney and court fees if you pass away without leaving an estate plan. Without a legal plan in place, your estate will likely pass through probate court, and your heirs could end up paying an attorney to represent them. Things could get really expensive if there are any legal disagreements over your property! By meeting with an estate planning attorney now, while you’re able to make your own decisions about your property, you can help your loved ones avoid all of the unnecessary expenses listed above.
If you have questions or need assistance, please feel free to contact our office.