Put the Planning in Estate Planning

At Mission Wealth we recognize that estate planning can provide peace of mind. It's often important for clients to rest assured that they are leaving behind a way to pass on assets to their loved ones and the organizations they care about.

Explore the 3 most common estate planning questions we help our clients answer.

1. Do you want to place any limits?

Even if you're sure your heirs will use your money responsibly, there's nothing wrong with putting some guard rails around your assets. This is especially true if you're leaving behind a significant amount of money that might tempt even responsible heirs to make some irresponsible decisions.

Establishing a trust can help your heirs learn how to protect, respect, and build wealth. A trustee of your choosing acts as an administrator who executes specific terms that you establish. For example, you might say that your money can only be used as a down payment on a first home after your grandchild graduates and lands a job. You could set annual limits on how much money your heir can draw from the trust or set an age restriction. You could establish a percentage of each withdrawal that must be used for charitable purposes. Or you could list things you don't want your money to go towards, such as luxury vehicles or vacations.

2. What is your property really worth?

As beautiful as your great-grandmother's china is, there's always a chance that it won't be your granddaughter’s cup of tea. Talking to potential beneficiaries about your most beloved possessions can keep your heirlooms from winding up in yard sales and dumpsters. You can also stipulate in your will if you would like unwanted items to be passed down to another heir, or donated somewhere special, like a museum or nonprofit.

Another potential safeguard is to have your most valuable items appraised. Including these evaluations in your will can help your heirs appreciate what you've truly left them. Plus, if you stipulate that they're allowed to sell your items, heirs will be less likely to settle for a bad deal.

Assigning beneficiaries for larger items like real estate and vehicles can be more problematic, especially if you want children to share them equally. What happens if one son doesn't want to pay a fair share of the upkeep on your vacation property? What if everyone decides to sell your fishing boat, but the daughter who's been handling maintenance for years feels entitled to a larger cut?

Rather than hoping your heirs will settle these kinds of issues themselves, make some specific provisions about how large items can be sold, how proceeds should be split, and who, if anyone, has final say. As uncomfortable as it may be, talking through these scenarios with your heirs while you still have your voice can prevent bad blood and lawsuits. You might even discover that there are items in your will that nobody wants. That gives you the power to donate them or sell them and split the money as you see fit.

3. What are the potential tax ramifications for your estate and your beneficiaries?

Generally, only very large estates need to worry about federal estate taxes, which is the amount that's paid to the IRS from your estate after you die. In 2021, that applies to total assets over $11.7 million. However, 12 states (Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington) and the District of Columbia have their own lower estate tax thresholds.

There are also six states (Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania) that charge an inheritance tax, which is a tax that your beneficiaries pay upon inheriting your assets.

In many cases, your spouse and children are exempt from paying these kinds of taxes. However, a loved one who inherits a large IRA or sells your classic car could get bumped up into a higher income tax bracket. Without proper planning, your generosity could create some serious headaches for your executor and your heirs.

That's why it's so important to dig into the details of your estate plan, no matter how large or modest it may be. If you’ve been putting off these important decisions, let us help you sort through all your options, identify potential problem spots, and build the specific legacy you want to leave behind.

3. What are the potential tax ramifications for your estate and your beneficiaries?

We help you create a plan so your loved ones will be well cared for – maximizing the impact of your charitable gifts. From basic to advanced strategies, we believe estate planning is critically important, and often overlooked.

Many clients create plans and then put them on a shelf. However, as your financial status and family dynamics change, not to mention estate and income tax laws, it’s important to review your plan periodically to ensure it still fits your needs.

Whether your goal is to create a lasting legacy by leaving your estate to heirs or charity, to minimize taxes, or to maximize lifetime giving, we are here to provide clarity and direction. We have the knowledge to guide you through all phases of your estate plan to ensure that your wealth is directed as you intend.

00413905 08/21