Family Wealth and Estate Planning Articles

Filing a gift tax return, even when no tax is due, can be beneficial as it starts the clock on the statute of limitations, limiting the IRS to three years to challenge the gift's valuation. Adequate disclosure in the return can prevent future disputes and provide peace of mind.

Estate planning is essential for single and child-free individuals to ensure their final wishes are respected and their assets are distributed according to their preferences. It allows them to specify beneficiaries, appoint trusted individuals to manage finances and medical decisions if incapacitated, and employ strategies to reduce gift and estate taxes.

A revocable trust, also known as a "living trust," is a flexible estate planning tool that allows you to manage your assets during your lifetime and ensures a smooth transfer to your beneficiaries after your death. It helps avoid the probate process, saving time and costs while maintaining privacy, but it does not provide asset protection from creditors or direct tax benefits.

A donor-advised fund (DAF) is a flexible tool for charitable giving that allows you to allocate funds during your lifetime and direct donations over time. It can be established with an initial contribution, managed by a financial institution, and offers tax benefits while ensuring your charitable legacy continues after your death.

When planning your estate, leaving specific assets to specific heirs might seem like a good idea, but it can lead to unintended consequences. For example, changes in asset values over time can result in unequal distributions among heirs, potentially disinheriting some family members. To avoid such outcomes, consider distributing your wealth based on percentages or dollar values rather than specific assets.

Relocating a trust to a state with low or no income taxes can offer significant tax advantages, especially for irrevocable, non-grantor trusts that accumulate substantial income.

Estate planning for individuals living outside the United States involves understanding domicile and residency, navigating tax implications, and considering asset location and jurisdiction. It also requires awareness of marital deduction rules, succession laws, and the importance of professional advice to ensure a comprehensive and compliant estate plan.

Choosing a guardian for your child involves designating someone in a legally valid legal document who can take on the responsibility if you pass away or become incapacitated. It's important to select a trustworthy person with the necessary time and resources, and to consider the child's best interests, including their living arrangements and relationship with the guardian.

An advance health care directive allows you to outline your medical care preferences in case you become incapacitated. This document is a crucial part of your estate plan, ensuring that your health care decisions are respected and followed. It includes directives like a health care power of attorney, living will, and DNR/DNI orders, which can be tailored to your specific needs and state laws.

A well-crafted, up-to-date will is essential for an effective estate plan, helping to ease the burden on your family during difficult times. Key elements to include are an introductory clause, provisions for debt repayment, specific bequests, and the appointment of an executor. Ensuring compliance with federal and state laws is crucial for the validity of your will.