When you put off estate planning for a number of years, and you finally decide to roll up your sleeves and get started, you may have no idea where to begin. Everyone has heard of a last will, but is that the right choice, and do you need anything else?
Many people have these questions. Let’s look at some steps that you may want to consider when you start to devise your estate plan.
Create an Inheritance List
You should create an inheritance list so that you know exactly who you want to include in your estate plan. Naming names may be relatively simple, though there could be some soul-searching involved.
However, there is another level to take into consideration. Each person on your inheritance list is going to be in a different life situation, they are going to have different challenges and personal proclivities. You should think about the way that an inheritance could impact each individual person, because there are different ways to transfer assets.
Inventory Your Assets
Once you know who you are going to be including, you have to determine exactly what it is that you will have to give. Clearly, this can be an imperfect science, because you have no way of knowing the exact trajectory of your financial situation from Point A to Point B. However, you can get a general idea.
One reason why this is important is because of the potential for estate tax exposure. There is a federal estate tax that is applicable on asset transfers that exceed $5.43 million. This is the figure that is in place during the current calendar year, but there are annual adjustments to account for inflation.
Your real property and your insurance policies on your life count as part of your estate, and you should recognize this when you are evaluating your net worth.
We practice in New York, and in our state, there is also a state-level estate tax. Until the end of March of 2016, the New York state estate tax exclusion is $3.125 million. It will go up by around $1 million per year each year until it eventually reaches the amount of the federal estate tax exclusion.
If you are facing exposure, there are things that you can do to mitigate the burden when you are planning your estate.
Evaluate Your Objectives
Once you know exactly what you have to give and who you are going to give it to, you should evaluate your precise estate planning objectives. What do you want to do for each respective person on your list? Do you want to give to charitable causes? Do you want to include spendthrift protections? Do you want to protect children from a previous marriage?
The answer to these and other questions will help to shape the nature of your estate plan.
Contact an Estate Planning Attorney
The final step would be to schedule a consultation with a licensed estate planning attorney. You can bring along all of the information that you have compiled, and you can set the wheels in motion.
Ultimately, you can work with your attorney to create a custom crafted plan that ideally suits your needs.