Many people assume that if they do not have substantial wealth, they do not need a will or a revocable trust.
If your wishes are completely in line with Florida’s intestate provisions you might not need a will. However, if your wishes differ in any way, large or small (which is almost always the case), a will or a revocable trust is likely the only way to guarantee that your wishes will be fulfilled.
Do you have minor children? If the answer is yes, then you need a will now! A guardian should be named for your minor children. You do not want a court to choose a guardian for your children if you have and know a viable choice.
Remember, your will and revocable trust do not cover all of your assets. You must name beneficiaries under life insurance policies, retirement plans, IRAs and pension plans. These interests do not pass by will or revocable trust and play an important part in your planning strategy.
You may want to consider holding your insurance policies in an irrevocable life insurance trust and not in your own name. Otherwise, the insurance proceeds will first be taxed to your estate, thereby reducing the amount distributed to your beneficiaries.
Also, it may be advisable to take advantage of annual and lifetime gift exclusions (the annual exclusion is $14,000 for 2017 and the lifetime gift exclusion is $5,490,000 for 2017, and both exclusions are annually indexed for inflation). If you can afford to do so, this is an efficient way to reduce your taxable estate. Further, you can make unlimited gifts as direct payments for school tuition and medical expenses. These gifts do not require use of the annual exclusion.
Title your assets properly. You need to title or own your assets in proper form to fund your lifetime estate tax exemption, take advantage of mechanisms like bypass trusts, and avoid assets being subject to the claims of certain creditors. For example, if your bank accounts are held jointly with an adult child (i.e. to allow an adult child to make withdrawals on your behalf), the law will presume that your child owns half the funds in the account and, as a consequence, your child’s creditors can attach half of the account.
Be sure to plan for the possibility that you may become incapacitated and unable to make medical or financial decisions for yourself. Again, if you do not execute the proper documents authorizing an agent to make these decisions for you, court intervention will be required to appoint a guardian. Guardianship proceedings in these, or any, circumstances can be both financially and emotionally costly.
Do you own or have an interest in a family business? If yes, you should create a comprehensive business succession plan to document, among other things, the terms of future business ownership, management roles, investment strategies, and exit plans for heirs unwilling or unable to continue the business.
Lastly, make sure to schedule periodic reviews of your estate plan to make adjustments for changes in law, finances, or family structure and the inevitable occurrence of unanticipated events.
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8/10/17 UPDATE: annual gift exclusion year changed from 2015 to 2017 (no change in amount); lifetime gift exclusion changed from $5,430,000 in 2015 to $5,490,000 in 2017.