Estate Plan Optimization: Controlling Your Assets

June 19, 2022

Topics: Taxes | Estate Planning

Media type: Article, Podcast

Estate Plan Optimization: Controlling Your Assets

7.3 minute read • 

June 19, 2022

How to cover the basics and beyond

Let’s face it. No one wants to spend time planning while on the go.

But what if you don’t? Without proper planning, you can’t choose who gets what you’ve fought for all your life. If you want to be the one to make those decisions, you need an estate plan. When there are so many factors out of your control, it’s important to take the time to plan for the things we can control.

What is Estate Planning?
So what is estate planning? Estate planning is the process of creating legal documents to specify how and who will manage your assets in the event of your death or when you are unable to make decisions for yourself. Many people think that a will is all estate planning is. But it can also involve setting up a trust, which of course includes choosing the beneficiaries of retirement accounts and life insurance policies, and how you manage ownership of assets.

Here are some basic documents you may need in your estate plan:

simple will / complex will
revocable living trust
Financial Power of Attorney/Medical Power of Attorney
Living will/prior medical prescription
Make sure your assets are distributed the way you want
Once you have determined the documents required for your estate plan, you can determine exactly what your assets are and their value. Asset ownership is one of the most important aspects of estate planning, and often one of the most overlooked. Take inventory of all your assets, loans, benefits, insurance policies, money owed to you, and contact information for your trusted personal advisor (Vanguard has a financial inventory spreadsheet to help ). Share it with your family and others who should know, like a lawyer or your financial advisor. It is important to overcome any short-term hesitation in favor of a clear plan. The inventory of your belongings is not a one-time job. It is important to do this every few years so that it is updated for any new changes that may arise.

Simple and complex wills
Many clients already have a will, which is a set of instructions for how property held in your name should be distributed after your death. He also appoints executors and guardians, if necessary. This type of will only takes effect after your death. Since not all assets are distributed by will, it is important to regularly review beneficiary information on insurance policies and pension plans to ensure that everything is up to date. A common mistake I see is that the ex-spouse remains the beneficiary of the client’s retirement account upon divorce. Also, it is important to check that any assets held jointly are named as you wish, as the way assets are named may override the guidelines in the will.

revocable living trust
Trusts are an often overlooked estate planning tool, and they can work for a variety of different income levels. Trusts offer more control and privacy than wills, and they can help you plan your estate with more flexibility. Different types of trusts can be used to meet various situations.

Different types of trusts can be used to meet various situations, such as:

mixed family

heritage passed on to grandchildren

children with special needs

money for a specific purpose

Assets passed on to multiple heirs (such as a house or business)

Management of continuity during incapacity

Tax planning

Financial and Medical Power of Attorney (POA)
Having a power of attorney is important if there are times when you can’t make up your mind. A POA is someone you appoint to handle your decisions when you can no longer do so. A financial POA handles your financial decisions, while a healthcare POA handles your healthcare decisions.

Living wills and advance medical prescriptions
A living will outlines your medical preferences in end-of-life situations. Unlike health care proxies, which apply to other areas of medicine, a living will only contains instructions for end-of-life care.

If you are unable to manage your own affairs, please ensure your wishes are respected

One of the trickiest topics discussed with clients is what happens if they are temporarily or permanently unable to manage their estate plans. It is important to have a plan so that your financial and medical wishes can come true. Honest conversations are important for everyone right now and can help put your mind at rest.

In many cases, we only consider wills as estate planning. However, if you cannot make decisions about your healthcare (Healthcare POA), granting title to property, designating beneficiaries, creating trust documents, appointing someone to acting on your behalf, and if you are permanently unconscious or terminally ill (in advance), communicating your wishes to your doctor (medical prescriptions) are also part of estate planning. This must be done with knowledge and care.

Do you already have a real estate project?
It may be time to see him again. An estate plan is not something you can set and forget. Over time, you want to make sure your intentions haven’t changed and that you’re including the right people. Already married or divorced? born? Change your financial situation? Change of residence or accommodation? If it’s 5 years or more, it’s time to check if updates are needed.
If it’s less than 5 years, it’s worth taking the time to see if changes to tax laws affect your plans.
If you’ve been through a major life event, it’s worth revisiting your plans.
You can’t control the future, but you can plan for it. Our advisors are always at your service. let’s start
Make sure taxes don’t eat away at your estate
When tax laws change, it is important to review a client’s portfolio to understand how it may be affected. During your next consultation, your advisor may suggest that you work with a tax specialist to take advantage of new advantages or avoid additional taxes.

With an effective tax strategy in place, you can avoid costly mistakes that can erode your fortune. Your strategy may include:

Plan for state property taxes. In addition to the federal estate tax, many states impose their own estate and inheritance taxes. Twelve states and the District of Columbia have state estate taxes and six states have estate taxes. As of 2020, Maryland is the only state with both fees. While the estate tax is only levied on a small percentage of extremely wealthy families ($12.06 million in assets per person in 2022), it can be levied on anyone living in a state subject to inheritance tax. See the map below for more details.
Reduce estate and gift tax exemptions to $5,000,000 per person (plus inflation adjustments for 2018) by transferring some or all of your assets by December 31, 2025 to take advantage of increased exemption. If you know you will leave money to a loved one or an important cause, you can maximize what they will receive by giving gifts throughout your life. you can:

Giving money or property to family members or others. You can gift up to $16,000 per beneficiary per year, or $32,000 to any number of people for a married couple, without paying gift tax.
Donate unlimited amounts to charity.
Contribute to a loved one’s 529 college savings plan. Certain special tax rules make it a powerful estate planning tool. For example, you can make contributions for 5 years at a time without incurring federal gift tax.
Pay tuition or medical expenses of any amount for another person. You will pay the tuition fees directly to the institution on behalf of a relative. (This payment does not include books, supplies or room and board, only tuition.) Eligible medical expenses must be paid directly to the provider. Convert traditional retirement plan assets into a Roth IRA. In terms of estate planning, the main benefit of a Roth conversion is that you pay taxes now so your beneficiaries don’t have to pay taxes when they inherit your IRA.
build trust. Certain trusts can help reduce your estate tax bill. In terms of estate planning, it is essential for those who have significant assets. States with inheritance rights and/or inheritance rights
state property tax
property tax
Map of the United States showing states with property taxes. A description of the table is provided below.
Read the chart description

Estate planning isn’t just about money and tax cuts. They give you the ability to control what happens after you’re gone, so you can live the life you want today.

Ready to plan for the future? Partnering with Vanguard Personal Advisor Services® gives you access to advisors who have your best interests at heart. You will also receive a financial plan focused on your goals and designed to help you withstand market volatility and economic change.

Learn more about recommendations
Your goals are our goals.
We are at your side to help you have confidence in your future.