Estate Planning

Broadly speaking, estate planning is the process of structuring your assets to provide maximum efficiency when transferring to heirs at minimum expense and effort. Without a properly shaped estate plan, your financial wishes may not be fulfilled and your beneficiaries could be needlessly burdened—both emotionally and financially. 

Although the basics of estate planning are sometimes as simple as designating beneficiaries in wills and on policy forms, the actual mechanics of transferring wealth to the next generation can be quite difficult and complicated.

Why is Estate Planning Important?

With estate taxes set on the excess of $5.43 million per person in 2015, it may seem that estate planning is only a concern for the wealthiest of the wealthy. While most estates won’t be subject to this current estate tax rate, individuals still need to think about the impact of taxation on their assets issued to beneficiaries. This is because received assets will generally be subject to ordinary income tax, which can whittle significant amounts away from the accumulated value of an estate.

Certainly different asset types will be taxed differently, but someone’s life wealth can be reduced—in some cases by nearly half—through ordinary income taxes. This gets more complicated when the asset is not monetary, but rather physical, such as property, land, or houses. For many individuals that work hard their entire lives to leave wealth to their heirs, this prospect can be unsettling.

Thankfully, there are many strategies that can minimize the tax burden heirs may face. This can involve things like annuities, trusts, and life insurance policies, structured to ensure that beneficiaries receive the maximum possible.  To properly establish an estate plan that works in concert with your specific retirement plan, assets, and legacy goals, you should seek out as a financial advisor that provides an expert hand.