As the year draws to an end, it may be a good idea to take a look at your long term estate plan and make any necessary updates or changes to your plans.
Did this past year bring any major life changes to your family? Maybe you welcomed a new baby or in-laws to your family, or maybe you are going through a divorce.
With each major life change, you should consider your estate and financial plans. It might be time to set up trusts for your children or grandchildren, to protect their financial futures. You may realize that your former spouse is still listed as your agent on your financial or health care power of attorney documents. You may also decide that now is the time to create these documents for the first time, after receiving an unwelcome medical diagnosis.
Related post: Top 5 life events that cause people to create a will
Similarly, if you’ve purchased real estate, consider moving the property into a revocable living trust. This will keep the property from being subject to probate when you die.
Do not forget to consider your insurance coverage. Do you need to add anyone to your company’s health insurance policy? Should you speak with your life insurance company to update the beneficiary on your policy, or take out an entirely new life insurance policy? Based on any new additions, do you need to increase the amount of coverage you currently have?
In 2018, the IRS lowered the tax rates across every income bracket, including trusts and estates. Since taxes are lower, it may make more sense for you to make year-end investments, purchases, or other monetary transactions.
Speak with your financial adviser to determine if there are additional ways for you to take advantage of these lower rates before the end of the year.
In addition to reviewing your tax liability under the new rates, you should also take the time now to fund your retirement accounts, such as your 401(k), Roth IRA, and traditional IRA. This will maximize your tax benefits before you have to file your annual return in the new year. Fully funding your retirement accounts is one of the best ways to protect your family’s financial future, because the accounts will grow exponentially due to compound interest.
The end of the year is a great time to consider gift-giving, and not just because of the season. In 2018, the federal gift tax threshold was raised to $15,000 per person, meaning that you can give up to this amount to each of your children, siblings, nieces, and nephews, or anybody else without worrying about paying extra taxes.
November and December are also a good time to finish making any donations to charities, in order to maximize your tax deductions or to take advantage of your company’s gift matching policy.
When families come together for end of year holidays, it can be a good time to initiate difficult estate planning conversations. This lets everyone know how you intend to have your estate distributed after you pass, as well as your intentions for your healthcare in your final days.
Letting your family members know what your wishes are in advance, as well as discussing powers of attorney that you have in place, will help you avoid family drama down the road in the midst of a crisis. By initiating this conversation, you may inspire other members of your family to consider creating or updating their own estate plan in the new year.
This article is for informational purposes only and does not contain legal advice. To schedule an appointment to go over your estate plan, contact us today.