Simplify the focus: It’s all about you and your wealth, and the people near and dear to you.

• You are helping others to step in for you when needed.
  • If you can’t pay your own bills, or speak for yourself at the hospital, you are naming someone to be your representative.
  • For younger parents, you are setting up a Plan B for your kids, in the case that you pass while they are young.
• You are clarifying how your assets should be shared to others when you pass.
  • A will or trust instructs for much of your belongings.
  • For retirement accounts and life insurance, beneficiary designations name the recipients.
  • For investment and bank accounts, TOD controls the change, and literally Transfers on Death.
• You are reducing the time, money, and stress demanded at critical times.
  • Reduce estate taxes, reduce time for probate, reduce burden on others.

Understand the Building Blocks: Trust or Will, what is best for you?

• A Revocable Living Trust (RLT) – of the simplest in trust planning - helps to avoid probate, simplifies your estate closing, and reduces stress after you pass. You do it now, and pay for it now, or you leave it for your family to clean up and pay later. A simple Will costs less now, but more later.
  • Real estate deeds are transferred into the RLT along with any other assets or accounts that are not transferred by TOD or beneficiary designation.
  • You have full control over the RLT during your life as the trustee. At your death, you avoid probate and your successor trustee’s life will be simplified as they work on your behalf to distribute your assets.

• An Irrevocable Trust can be established to move assets out of your estate during your life, to reduce estate taxes when you pass. You give up ownership and control to the trust, choose beneficiaries, and a trustee.

• A separate Trust that can be set up or funded on your death may be the right thing for assets you give to kids for a couple of reasons:
  • Do you worry about whether your kids are ready to inherit and manage money? This allows you to provide guidance or guardrails.
  • Do you worry about the divorce rate and want to protect family assets from future divorce? Future business failure? Possible liability suits?
  • Do you need to plan for a special needs child?

• A Marital Trust is funded on your death to capture your allowed estate tax exemption and continue to provide support for your spouse as needed.

• Charitable Trusts pass your wealth to organizations that matter to you, provide tax benefits, and can provide income to you.
  • CRATS and CRUTS – these can be valuable in reducing highly appreciated assets, creating income to you during your lifetime, and passing the remainder to charity at your death.
  • Family Charitable Trusts – do you want to set up a charitable trust fund, funding it annually for tax or giving planning, and distributing gifts over time as needs and desires arise?

Understand how Trusts can simplify:

When you die, the things you own – perhaps a home, investments, bank accounts – have to be transferred to new owners. If these are valued above around $100,000, and they are owned by you, in your name, the courts will assist in the transfer. This is called Probate; the courts prove that you were in fact the owner and verify that you have named the recipients. Your family will hire a lawyer and the process may take several months to a couple of years before your assets are distributed and probate is closed. Your death will be announced by the court so that any creditors can come forward to be paid first.

With RLT planning, you transfer ownership of your assets to your Revocable Living Trust privately, now. You no longer own them; they are owned by a revocable trust that you control as the primary trustee. You review and confirm beneficiaries on all IRAs, 401ks, and life insurance policies, and you designate investment accounts and bank accounts to be TOD where applicable. With this simple planning, you have removed Probate from the burden your family will bear on your passing. When you pass, your successor trustee can act on your behalf to distribute your assets privately according to the RLT and can oversee the distribution of accounts that pass by beneficiary or by TOD.

Your oxygen mask first!

• Power of attorney documents are first priority and must be updated every 5-7 years. Each financial institution will review yours and determine whether it is acceptable to them. Keeping these fresh is important. If you don’t have one, get one now. If you do have one and it is more than 5 years old, plan to update it soon.
• If you have minor kids, what is your Plan B in case something happens to you? Consider Guardianship papers but first talk with the people you hope will parent on your behalf. Set up life insurance to fund the balance of their upbringing.
• Review all IRAs, 401ks, and Life policies now and regularly to be sure that these are up to date. Have you heard the story of the ex-wife who inherited her ex-husband’s large IRA, much to the dismay of his grieving widow. Don’t forget to review beneficiaries regularly!
• Handy tools include this digital estate plan, the ‘Crisis Notebook’ that you prepare for your family to refer to when you aren’t able to answer questions, and this simple chart that shows the functions of critical documents.

Estate Tax quick reference list:

• Federal Estate Tax exemptions have been quite high for several years, allowing the great majority of Americans to avoid this tax. In 2023, it was $12.92m per person, and it will decline in 2026, cut in half, and adjusted for inflation. The exemption indicates the amount of your estate that passes tax free. Assets passed to a spouse generally pass estate tax free so we are talking about non-spouse here.
  • The tax rate for the taxable portion of your estate ranges from 18% - 40% in 2023.
  • Large estates may want to consider gifting prior to 2026 to reduce estate tax at death.
• 22 states impose a State Estate Tax (on the estate) or Inheritance Tax (on the heir), above certain exemption amounts, and the exemption amount can double for a couple, with proper planning. This short list includes my current clientele residence states which do tax, and you can find more here online , and here .
  • Estate taxes:
    • Washington State allows $2.193m to pass tax exempt. The tax on the estate value above that, less applicable deductions, is progressive and ranges from 10-20%.
    • Hawaii allows $5.5m to pass tax exempt, and the tax ranges from 10% - 20%
    • Oregon allows $1m to pass tax exempt, and the tax ranges from 10% - 16%
    • New York allows $6.58 million to pass tax exempt, and the tax ranges from 3.06% - 16%
    • Vermont allows $5m to pass tax exempt and charges a flat 16% above that.
    • Massachusetts allows $1m to pass tax exempt and charges up to 16% above that.

My Take: As comprehensive Wealth Managers, we believe that ensuring your estate planning documents are in place is part of our brief and we will work with you to clarify your needs and options, complete your documentation, and review to keep up-to-date and relevant.