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If you own something and you love somebody, you need an estate plan. An estate plan is much more than just a tax plan. An estate plan includes how are you taken care of while you are alive, and then how things are handled at your death. An estate tax plan focuses on taxes, but that is only one piece of an overall estate plan.

We’ve all heard about celebrities who have died without a will, like Prince and Michael Jackson, and the disagreements over their estates. More recently, Larry King died having amassed a fortune worth about $50 million. Due to his eight marriages to seven different women, his estate planning situation was a bit complicated, as you might imagine. He was in the midst of a divorce settlement with his seventh wife when he died, and now she’s fighting against his handwritten will that excludes her. While your estate planning situation probably isn’t as filled with drama, it’s still important to have an estate plan in place.

The key components of an estate plan include:

  • Will. One of the most common mistakes with a will is not keeping it updated. You need to get out and review your will at least every five years, or if there has been a major life event in your family (a marriage, a divorce, a birth, or a death).It is important to be aware of what a will does and does not cover. Anything where you’ve named a beneficiary, i.e. retirement accounts or life insurance policy, won’t be covered in a will. The beneficiary designation supersedes the will unless you leave the asset to your estate. Additionally, any joint assets are automatically passed on to the joint owner at your death.
  • Powers of Attorney. Powers of Attorney help take care of you while you are alive. There are two types of Powers of Attorney: Medical and Financial. The Medical POA is for someone to make your healthcare decisions when you cannot. The Financial POA is for someone to make your financial decisions, manage your affairs and administer your finances when you cannot.
  • Living Will or Advanced Medical Directive. The living will is not a will. It is an advanced medical directive. I call it death with dignity. If you are incapacitated and have no hope for recovery, this provides instructions on how you want to pass on.
  • Trust. Do you need a trust while you are alive, or do you just need your legal documents to create a trust upon death? Choosing one or the other is a function of control, taxation, or other reasons that make forming a trust prior to death a better option for you. If you don’t have an attorney, we can recommend one.

Estate Taxes

The lifetime estate tax exemption limit for an individual is $11.7 million and for married couples is $23.4 million. With the Tax Cuts and Jobs Act of 2017, the estate exemption limit was almost doubled to its current numbers. When that Act expires in 2026, estate exemption limits will change back to a much lower threshold like the $5 million limit prior to 2018, or even $3.5 million that President Biden has floated.

When you add up the value of your home, any other real property, retirement accounts, and any life insurance policies, the value of your estate can be larger than you realized. There are things you can be doing now to take advantage of the higher estate tax rules and get some of the items out of your taxable estate to protect yourself and your estate from future tax law changes.

Estate planning can be complicated, but it doesn’t have to be if you have professional help on your side. At Brogan Financial, we work with your attorney to help ensure effective execution of your plan. An estate plan is an important part of your retirement plan, and should work with all other aspects of it, such as your tax minimization strategy and long-term care plan.



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