Safeguarding the future of your loved ones is one of the most important parts of what effective Financial Planning is all about. Unfortunately, however, when you don't have a financial advisor who is on your side, chances are that your heirs and beneficiaries will receive only part of your estate. This is because the rest will go towards taxes and administrative costs that can center around commissions or other charges calculated as a percentage of your total assets. True fee-only Financial Advisors don't accept commissions or compensation based on product sales or other related costs. This means you get more comprehensive advice because they don't have to choose between what's best for you or what's best for them. Why is this so important in helping you minimize estate shrinkage and allowing you to achieve your lifetime personal goals?
Death-Related Costs
We know that death is an uncomfortable topic but, is necessary especially with effective estate planning. Whether you are single, widowed, married or divorced, there are certain death-related costs your estate incurs. For example, there are medical bills and funeral expenses; attorney, appraiser and accountant fees; along with probate expenses that include federal estate and death-related state taxes. That's quite a long list. Sometimes people also die with current unpaid bills, outstanding long-term debts, unpaid income and other property tax expenses.
Benefits of A Professional Advisor
A Financial Advisor with your best interests in mind, will assess your current situation and help you set realistic estate planning goals. For example, married couples who own joint assets and have designated beneficiaries for retirement funds and life insurance policies; still need to have a will to cover other important details. This includes naming an executor to administer the estate or a guardian for their children. They also need to clarify how taxes will be paid and how to distribute other property.
You might say how does this affect me? I'm not married. If you're single, estate planning is also important because if you have a home in your name or other assets you want to leave to a specific individual or charity; you have to put extra effort into these plans so they go according to your wishes. Minimizing estate taxes is a vital part of this plan and it's important to know ways you can do this. Putting a tax clause in your will; giving cash gifts; or, using life insurance are examples of how you can help reduce the overall tax burden on your estate.
Tax Clause
Federal estate taxes are expensive and usually must be paid in cash, within nine months of your passing. A tax clause in your will is a good choice here because some estates are subject to these federal taxes while others have hefty inheritance tax levies. Both can effectively dispose of and reduce a substantial portion of your estate. The purpose of the clause is to set forth your wish as to how you want these taxes paid so that the state doesn't make this decision for you. For example, if you leave $15,000 to each of your heirs, your intent with this clause is to make sure that they receive this money and not have to use it for estate taxes.
Gifts
Federal law lets you give up to $13,000 to as many people as you wish each year; without having to pay taxes. This typically includes your children, grandchildren and other close family members. It's a good way to reduce your estate and also a way to reduce estate taxes. When you give this money to your family, you are helping them which is a good thing; and you can watch them enjoy your estate while you are still living. If you're single and don't have children or other close family members, another way to remove assets from an estate is to contribute to a charitable gift annuity.
Insurance
Life insurance proceeds can help beneficiaries meet their needs, while also providing funds that help pay these estate taxes. By using insurance as an effective estate planning tool, you can have the proceeds of the policy pass to your beneficiaries free of income tax, estate tax and probate costs. That's why an advisor who has your best interests at heart is so important in helping with these sensitive details. They'll let you know the right choices that will fit your specific cares and needs.
At Artifex Financial Group, we know that estate planning goes well beyond making a will; it also involves making decisions in so many other important areas. This includes how to minimize or eliminate these taxes; reduce unnecessary probate costs; and ensure that you have the additional help you need. Please contact us today and learn more.