This week is National Estate Planning Awareness Week. Fall is a great time to start or revisit your estate plan (before the busy holiday season begins).
Our Trusts & Estates attorneys took time to anticipate some questions that may be occurring to you right now…
“I thought I finished my estate plan. Do I have to revisit it?”
Estate planning is a process, not a one-time event. Change in family circumstances (marital, health, economic, etc.) and changes in the law often require revisions to your planning documents. Planning documents that are more than five or 10 years old often need revising. Most often, revising the estate plan simply involves subtle changes to these documents. It is also important to confirm that the planning in place has been completed. On occasion, final drafts of documents remain unsigned or the signed documents lack coordination with the assets of the estate. Making sure that assets are appropriately titled and that beneficiary designations have been reviewed is important in estate planning.
“Am I too young for estate planning?”
All adults should plan for incapacity and death regardless of the value of their estate. Failure to do so can result in a messy situation for surviving family members. Accidents and illness can happen at any age. It is important that each person have a nominated legal representative to handle financial and medical care decisions in the event of incapacity. In addition, failure to have a valid will or trust designating the representative for an estate will simply result in more cost to determine the rightful party, as well as potentially cause confusion about who should receive estate assets.
“Don’t I just need a simple will?”
Most people approach estate planning with the view that their planning needs are simple. In reality, most people have planning needs that are more complex. For instance, many people name children or grandchildren as beneficiaries of their estate. In doing so, it’s important to consider when the estate should be distributed to the beneficiary (outright, in installments or at a specified age), how much should be distributed, and the succession of the beneficiary’s interest, if the beneficiary predeceases. Other considerations that require more detailed planning involve planning for guardianship of minor children, estate taxation, children with special needs, unique asset succession (cabin or business), blended families, etc.
“Given the status of the federal estate tax laws, why plan for estate tax?”
As of right now, the federal estate tax exemption is $5,430,000. This exemption amount increases to $5,450,000 for 2016. While this might lead people to think they won’t owe any estate taxes, it is important to consider that the Minnesota estate tax exemption for 2015 is $1,400,000. The Minnesota estate tax exemption will increase to $1,600,000 in 2016. Many people mistakenly believe that they will not owe estate tax upon their death; however, their thinking is not always correct. Any life insurance that you own is considered to be part of your taxable estate. This means that if you have an estate of $1,000,000 plus a life insurance policy for the benefit of your spouse for $750,000, upon your death your estate is considered to be $1,750,000. This means that $350,000 ($1,750,000-$1,400,000) of your estate will be taxed by the state of Minnesota.
Due to the fact that the Minnesota exemption is much lower than the federal exemption, it is not unusual for a Minnesota resident to owe state estate taxes, but no federal estate tax. This is why estate tax planning is so essential in Minnesota. Additionally, the federal tax exemption and the state tax exemption may change, which makes continual planning even more important. We encourage all clients to factor tax planning into their estate plan, and there are a variety of planning techniques we can utilize to help mitigate certain tax consequences.
Contact us today to start or revisit your estate plan. David Ness can be reached at 952.995.9500 and david.ness@fmjlaw.com.
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