Planning for your eventual demise is not the most pleasant thing, for sure. However, it’s something that you should think about right now, no matter what age you are. The truth is, without the right estate plan in Michigan, your heirs and your estate may be at risk. There are three key things that you should know about estate planning that will assure you and your heirs of security.
What, exactly, is estate planning anyway?
It may seem like estate planning is just about saving money and then writing a will that specifies who gets it, it’s much more than that. It’s better described as a strategy for distributing wealth to your heirs before and after your death. It involves the strategic distribution of your money, property, investments, and even your business. According to the Cornell University Legal Information Institute; “Estate planning is the process by which an individual or family arranges the transfer of assets in anticipation of death. An estate plan aims to preserve the maximum amount of wealth possible for the intended beneficiaries and flexibility for the individual prior to death.”
You Probably Will Not Owe Gift or Estate Taxes
Most people in the U.S. don’t really need to be concerned with estate and gift taxes. The federal, lifetime exemption for both is $5.4 million. Each year, as of 2015, you give cash or property gifts valued at $14,000 each to an unlimited number of people without tax consequences. Anything over the exemption amount, however, will result in you having to pay gift taxes. One exception, though, is a 529 college saving plan, which can be loaded with a one-time payment equal to five years of annual exclusion gifts. The caveat here is that there is no gift tax liability as long as the recipient does not get any more gifts over those five years.
Timing Is Everything When It Comes to Gifts
Keep in mind that the exemptions mentioned above are for each calendar year. Some people choose to give their gifts at the end of the year, making tax time easier, but that is not necessary. Therefore, if you want to give your grandson $25,000 to buy a house, you’ll risk having to pay a gift tax if you give it to him all at once. However, if you give him $14,000 in December and the remaining $11,000 in January, both gifts will be tax-free. This strategy assures your heir of receiving the money they need, and it protects you from having a large tax bill. The same scenario would hold true if you were gifting stocks, property or other non-cash assets.
The Time to Start Planning Is Now
The cold, hard truth is that no one is guaranteed any amount of time on this planet and things change quickly. That said, you should, no matter what your age, start looking at your estate and planning things out for the future. If your situation changes, you can always alter your plan to suit your new circumstances. In fact, it is a good idea to review your estate every three to five years, just to be sure that everything is accounted for in the way that you wish.
If you have any questions about estate planning in Michigan, please contact us. We are experts in the field and we have helped people, just like yourself, plan out their estates over the years. We will be more than happy to discuss your options with you, anytime.