The Estate Planning Crisis

The Estate Planning Crisis

Over the years the focus on estate planning has diminished for most people. This is mostly likely due to the estate exclusion being dramatically increased in recent years. Because most people do now not have to worry about paying estate taxes, they feel estate planning is not needed. This is a mistaken assumption.

The primary purpose of estate planning remains what it always has been—not to leave a mess for your heirs to sort out. While a component of the ‘mess’ for most of us no longer involves liquidating large portions of an estate to satisfy Uncle Sam, planning is still necessary for everyone.

If you pass with no estate plan in place, state law dictates how your assets are distributed. This can lead to some very poor unintended consequences. While most of your estate will be directed towards your decedents, most states also have provisions that part of your estate be distributed to your parents, if still living. In Colorado if you die without a will and have a spouse and parents, your spouse receives the first $200,000 plus 75% of the balance remaining with your parents receiving the balance (25% of property after the first $200,000). For most people this may not be a problem but think about this outcome if you had a parent in a nursing home receiving Medicaid; all Medicaid payments would cease until the portion of your estate inherited is exhausted.

Someone will also need to be appointed the executor of the estate. For close families this generally isn’t an issue; judges generally take into consideration who the family prefers to be executor. For families that don’t get along, the judge will often appoint a paid executor that will be paid out of estate assets.

There are numerous other tasks that must be completed to settle an estate, such as filing notice in a local paper, preparing an inventory and a final accounting, determining disposition of last remains, and paying for the funeral—often with estate assets unaccusable. I could go on for several pages, but the bottom line is, please, think of the people you care about that are going to have to clean up this mess.

At Presidential Wealth Management we have created an application that takes much of the mystery out of the estate planning process. Ultimately, an estate plan is nothing more than instructions outlining who should receive your assets in the most efficient way. Our system allows you to enter all the people who are important to you, enter your assets, and then indicate who should receive each asset, or percentage of an asset. You can also upload estate planning documents you have prepared in the past, if you have any. Based on what you have, and the distribution plan you have created, an estate attorney can then advise you what remains to be done to have an easy to settle estate. The application has several added features that you can use if you would like, such as a family tree builder and an easy way to write your life story that you can pass down to your decedents.

Let your advisor know if you are interested in starting the process. The passing of a loved one is stressful enough without the added burden of sorting out a mess. If you have been involved in settling a difficult estate, then you know what I’m talking about—make it easy for your family.

 

Annual Estate Exclusions

YearExclusionTop Tax Rate
1998$625,00055%
1999$650,00055%
2000$675,00055%
2001$675,00055%
2002$1,000,00050%
2003$1,000,00049%
2004$1,500,00048%
2005$1,500,00047%
2006$2,000,00046%
2007$2,000,00045%
2008$2,000,00045%
2009$3,500,00045%
2010$5,000,00035% or 0
2011$5,000,00035%
2012$5,120,00035%
2013$5,250,00040%
2014$5,340,00040%
2015$5,430,00040%
2016$5,450,00040%
2017$5,490,00040%
2018$11,180,00040%

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