“There are reasons other than minimizing estate taxes to get an estate in order.”
Current tax laws have made estate planning more complicated. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 reinstated the estate tax in 2011. Here are some tips to help you plan your estate and the estates of your clients with respect to these evolving tax laws.
Plan the estate, even if it won’t be subject to estate taxes. The amount one can distribute to heirs other than a spouse without paying estate taxes is $5 million in 2011 and 2012 (indexed for inflation in 2012). However, there are reasons other than minimizing estate taxes to get an estate in order. For instance, parents with minor children should name guardians and provide for their children’s support, while individuals with previous marriages may want to protect children from prior unions. Clients may also need a will, durable power of attorney and health-care proxy.
Leave written instructions for heirs. This can provide heirs with important financial and personal information and clarify requests made in other legal documents.
Name executors, trustees and guardians with care. An executor administers an estate through probate court, locates and values all assets, pays the estate’s obligations and distributes the estate to heirs. A trustee manages the estate and distributes income and principal. A guardian takes physical care of minor children and handles their finances. All three roles significantly impact an estate, so these individuals should be chosen carefully to ensure they can handle the responsibilities.