The term “estate planning” often calls to mind the wealthy. But estate planning is about a lot more than taxes. Here is a workable definition of good estate planning:
“A good Estate Plan protects what you have, and allows you to pass it on to whom you wish, on the timetable you wish, in the manner you wish, while avoiding as much as feasible unnecessary costs, fees and expenses.”
Durable Powers of Attorney for property and health matters, the “Living Will” or advance medical directive, are all tools to help prevent premature involvement by the courts in your financial or personal affairs.
Court involvement after a death can also be minimized or eliminated through careful drafting of provisions in your Last Will and Testament, perhaps also a Revocable Living Trust, and thoughtful deployment of beneficiary designations where available on bank accounts, investments, and retirement plans.
As for taxes, a famous judge once wrote:
“Anyone may arrange his affairs so that his taxes shall be as low as
possible; he is not bound to choose that pattern which best pays the
treasury. There is not even a patriotic duty to increase one’s taxes.
Over and over again the Courts have said that there is nothing sinister
in so arranging affairs as to keep taxes as low as possible.”
When Judge Learned Hand wrote that, the modern federal estate tax was about 20 years old, and applied to estates over $40,000 with initial rates of 2%.
Today, the amount excluded from federal estate tax is $5.43 Million. Estates above that are taxed at graduated rates, up to a top rate of 40%. With proper planning, a married couple can pass a joint estate of nearly $11 Million to heirs with no federal estate tax. But Washington has its own stand-alone estate tax. The measure is the Washington taxable estate, which is defined as the federal taxable estate, less $2.012 Million. The tax rate is from 14% to 20%.
If a federal return is filed using the marital deductions available, then an election can be made on the state return of an exclusion amount different from the federal amount. This allows the maximum benefit (and the minimum tax) on the two combined returns. This election must be made, it is not automatic, and once made it is irrevocable. The estate plan needs to have flexibility to make this feasible.
Larry offers a no-cost review of your circumstances and any documents you have in place. Working with you to determine the best combination of estate planning tools, he can often quote a fixed fee to provide you with an up-to-date estate plan. Call Larry today!
Estate planning, including but not limited to:
- Living trusts
- Community property agreements
- Credit shelter trusts
- Marital trusts
- Minor’s trusts
- Special Needs trusts
- Durable powers of attorney – Health care, Property and financial
- Advance Medical Directives – “Living Will”
- Advanced estate planning for business owners