It may be the biggest cliché of all, but Ben Franklin knew what he was talking about when he declared the two certainties in life – death and taxes. There is no way to escape the first, but with proper planning you can reduce or avoid the latter.
1. Is Massachusetts an Intended Beneficiary of Your Estate? Paying taxes is an important civic duty, undoubtedly, but there is no reason to pay more than is legally required. An experienced estate planning attorney can counsel you on how to pass on the maximum amount of your estate to your loved ones tax free.
2. Consider the Savings. If you have a federally taxable estate (currently an estate that exceeds $5.12 million) then don’t pass “Go” and contact an estate planner as soon as possible, assuming you have not done so already. The federal government takes quite a chunk of the excess – 35 percent right now – subject to revert back to 55 percent in 2013 when the threshold will drop to $1 million unless Congress acts first. If you’re cost-conscious, then consider the benefit of paying an estate planner a few thousand dollars in exchange for saving tens or hundreds of thousands of dollars, (not to mention having your affairs in order). In Massachusetts, the tax rate is much more reasonable – beginning at 5 or 6 percent, but rising to 16 percent, depending on the size of your estate. Why not plan to reduce or eliminate that possible burden?
3. A Child is Born. Parents ordinarily have strong feelings about who to nominate as guardian to care for their children in their place. In Massachusetts, this nomination can be made in a will and also as an independent document. You will have peace of mind knowing your children will be cared for by the person of your choice.
4. Divorce. It is likely that you don’t want to benefit your ex-spouse upon your death. You will have to update your estate planning documents, including your power of attorney and health care proxy. Don’t forget the beneficiary designations on your retirement plans and life insurance policies.
5. Second Marriages. The previous point is probably even stronger if you have remarried. Upon a second marriage, additional considerations come into play. Perhaps you have children from your first marriage. Perhaps you now have stepchildren. Perhaps you plan to have a new child with your new spouse. You need to decide how you would like to benefit your children – whether it will be equally across the board or in a different fashion according to your values.
These are only five of the countless reasons you should not only plan your estate, but also consider tax planning, if applicable. We’ll leave you with one last gem from Ben Franklin appropriately regarding planning: “Never leave till tomorrow that which you can do today.”
