What is Estate Planning?
Estate planning is the process of accumulation, management, conservation, and transfer of wealth considering legal, tax, and personal objectives. The two primary considerations of an estate plan are effectiveness (adhering to the objectives of the original owner) and efficiency (minimizing taxes and other transfer costs). The documents associated with an estate plan (wills, trusts, powers of attorney, etc.) should only be prepared by an estate planning attorney who is licensed in your state.
The Basic Documents of an Estate Plan
Will – Without a valid will, property will be distributed via state intestacy law, unless its transfer is governed by contract law, titling law, or trust law.
Durable Power of Attorney for Health Care – In the event of disability, the designated agent will be authorized to make health care decisions on the principal’s behalf.
Living Will/Advanced Medical Directive – This document articulates an individual’s last wishes regarding sustainment of life under specific circumstances.
Some Simple Estate Planning Steps
Property Titling – Besides achieving the transfer objectives, this may help to minimize probate costs after death, especially if it includes rights of survivorship.
Beneficiary Designations – On life insurance policies, annuities, and certain investment accounts such as IRAs and 401(k)s, having the proper beneficiary spelled out along with possible contingent beneficiaries can avoid substantial grief and minimize probate costs.
Living Trust – While a revocable living trust does not avoid estate taxes, it can help minimize probate costs.
Further Estate Planning Considerations
For 2023, individuals may gift up to $17,000 per recipient without incurring a gift tax. A married couple may gift up to $34,000.
For 529 college savings accounts, a married couple may gift up to $170,000 based on the special 5-year carryforward rule.
For 2023, the lifetime exclusion amount from gift, estate, and generation-skipping transfer taxes is $12,920,000 per individual or $25,840,000 per married couple. These amounts will increase with inflation, but in 2026, they are scheduled to be cut in half. For people who are concerned about exceeding these limits (a good problem to have!), there are many types of trusts and gifting strategies that may be utilized.
How Clarity Capital Advisors Can Assist You with Your Estate Plan
We will work with your estate planning attorney to ensure that titling is correct and beneficiaries are properly designated on the accounts that we manage.
For charitable giving, we can manage accounts like donor-advised funds (please see our Charitable Giving page for more information) and charitable trusts. We can also serve as an investment fiduciary for a private foundation.
For all gifting, we can advise on the appropriate assets to give, based on the intended recipient.