THE PRIMARY GOAL of estate planning is simple: You want to make sure your assets end up with the right folks.
In all likelihood, you have already made a slew of estate planning decisions, perhaps without fully appreciating it. For instance, when you and your spouse bought the house and the car jointly with right of survivorship, you ensured your spouse would inherit both items should you die first.
Remember the IRA you opened years ago, with your sister named as beneficiary because you hadn’t yet met your spouse? Unless you change the beneficiary, your sister will likely get that money after your death. Beneficiary designations also determine who will inherit trust assets, payable-on-death accounts and the proceeds from any life insurance.
What about your will? That determines who receives assets that go through probate. But as you might have gathered, assets like retirement accounts and property owned jointly with right of survivorship can go directly to your heirs, without being subject to probate.
While estate planning is mostly about who gets what, you’ll also want to give some thought to end-of-life decisions and to taxes. Federal estate taxes aren’t an issue for 99.9% of Americans, thanks to 2022’s $12.06 million estate tax exclusion and 2023’s $12.92 million. But your heirs could face state estate taxes, which can be owed on even midsize estates, and they will have to pay income taxes on any traditional retirement accounts you bequeath. With the latter in mind, you should think carefully about which assets to spend down during your lifetime and which ones to set aside for your heirs. Want to make sure your estate plan is fully fleshed out? You might start with our checklist.
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