Estate planning is a major task that all adults should think carefully about. While most people think about writing out a quick will, many might not realize that there are other factors to consider when you’re thinking about an estate plan.
Your estate plan encompasses handing your assets down to your heirs, but there are things that you need to think about before then. Understanding how to put everything together is important.
Estate taxes, both federal and state, can have a negative impact on what your loved ones receive when you pass away. It’s possible to pay down your estate by giving gifts to friends and family members.
One important consideration is that there are limits to how much you can give as a gift each year. In 2022, the limit is $16,000 per year per person. This means that you can give 10 different people each $16,000 to avoid the gift tax and pay down your estate.
Most financial accounts are handled through a payable-on-death designation, which is also known as a Totten trust. While this isn’t a direct component of your estate plan, it’s a way that you can easily pass down the contents of a checking, saving, retirement or investment account to an heir as long as it’s one that’s executable as a Totten trust.
Creating an estate plan that puts your loved ones first is important because it’s one of the only ways you can ensure they’re taken care of after you die. Making sure it’s all in order is important so you can rest easy as you know that it’s handled.