Non-Tax Family Issues in Estate Planning

James Beall, CPA, CFP®, PFS, CVA Director, Kassouf & Co.

Under current law, the estate tax exemption is $5,490,000 per person or $10,980,000 for a married couple. Assets in these amounts can be passed to heirs free of federal estate and gift tax during life and at death. With the possibility of eliminating the estate tax for many Americans under the Trump tax bill, there is a misconception that estate planning is not needed.

There are many non-tax reasons to have an estate plan. Here are a few:

To pass assets in accordance with your intentions. In the absence of a will or trust, the intestacy laws of your resident state at death will determine who inherits your assets. The state provides no allowances for special circumstances or family dynamics. By having a valid will or trust, you can determine who receives the assets, the value of the assets, and the type of assets that pass to each beneficiary. A will or trust can also specify if an heir will inherit assets outright or whether the assets will remain in trust for their benefit for a specific period of time, or throughout their life. A carefully considered estate plan can help prevent family unrest, especially with blended families or when assets are divided in a non-traditional manner.

To designate a guardian for minor children. It is important to establish a will in order to name the person(s) with values most similar to your own to care for your minor children. Without a will in place, the court will select a guardian to assume that role.

To plan for a child with special needs. Passing assets to a beneficiary with special needs could prevent that person from receiving government benefits. Special needs individuals who own more than $2,000 in assets do not qualify for Medicaid and Social Security. Proper planning and a special needs trust can allow the beneficiary to have assets available without losing any public assistance.

To determine healthcare decisions. A power of attorney allows you to choose the person(s) who will manage your financial affairs in the event you are unable to handle them on your own. Without a power of attorney in place, the court will name a conservator to make financial decisions on your behalf, which will require burdensome financial accounting. A living will or healthcare directive will provide physicians with the name of the individual responsible for making healthcare decisions in your best interest when you cannot do so for yourself.

To plan a business succession. Business succession planning is a major issue for small and closely held businesses. The individual(s) who will take ownership and control of your company should be carefully reviewed during the planning process. Business succession planning should create a smooth transition from one generation to the next, especially when some, but not all family members work in the family business.

James Beall, CPA, CFP®, PFS, CVA

Director, Estate Planning and Administration Group

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