Estate Planning Tips

Estate Planning
February 3, 2022

There is a common misconception that only the wealthy need to worry about estate planning, but estate taxes are only part of the planning process. Income tax can be something to think about if inheriting retirement accounts. It is also important to regularly check your beneficiaries to ensure your funds go to the right people. We suggest meeting with an estate planning attorney and accountant to help sort through your individual situation. Some tips to bring up are:

Set up a Trust. If you have a sizeable estate or are worried about your beneficiaries not being responsible, you can set up a Trust and appoint a Trustee to distribute your assets. There are many different types of Trusts but importantly, money in a Trust avoids probate. Probate is costly, public, and takes a lot of time which is why it is important to have a plan and avoid probate.

Convert traditional retirement accounts to ROTH accounts. If you have a Traditional IRA or 401(K) you will be leaving your beneficiaries money and the income tax liability that goes along with it. If you are in a lower tax bracket, you might consider converting some of the traditional accounts into ROTH accounts that have tax-free distributions for your beneficiaries.

Make sure you have a Power of Attorney (POA) for finances and medical care. A POA is a legal document that gives a person the power to act for another person. POAs can protect your property, finances, and medical interests if you become incapacitated.

Designate beneficiaries on your accounts including your retirement accounts, non-qualified accounts, life insurance policies, and bank accounts. It is usually as simple as filling out a form. By naming beneficiaries on your accounts, you can avoid probate.

These are just a few tips to consider, and we suggest meeting with a qualified estate planning attorney and/or accountant to help. You can call us, and we can refer you to the professionals we use.

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