The term "estate planning" throws some people off because of its association with the very wealthy. Yet estate planning is just as important for families without large financial reserves. According to CNN Money, "such a plan ensures that your family and financial goals are met after you die"—and that's something every family can get behind. CNN Money cites that an estate plan is made up of three major elements: a will, the choosing of a power of attorney, and a living will (sometimes called a medical power of attorney). Every person's estate plan will be different, depending on individual needs, and this is why it's important to work with a qualified attorney to find out what's best for you and your family.
Sometimes a trust, "legal mechanisms that let you put conditions on how and when your assets will be distributed upon your death," is an important addition to estate planning because they allow the reduction of your estate and gift taxes. Trustees will exact the trust. According to the Illinois Trusts and Trustees Act, a trustee can be "appointed by or pursuant to the instrument creating the trust, by order of court or otherwise, and includes an individual and a corporation qualified to administer trusts in this State." The trustee will have access to all processes regarding the estate and estate plan, upon death or incapacitation of the trust's owner.
In the beginning of 2013, the federal estate tax exemption—"the amount you may leave to heirs free of federal tax," reports CNN Money—was changed to $5.25 million. Inheritances over $5.25 million are taxed heavily, at 40 percent. To avoid this heavy tax, the wealthy can reduce an estate while they are still living by gifting small chunks of it to their beneficiaries. The tax-free gift amount one is allowed to give to an individual annually is $14,000. This means a person and his or her spouse can give up to $28,000 annually to a beneficiary. "You may also pay an unlimited amount of medical and education bills for someone if you pay the expenses directly to the institutions where they were incurred," according to CNN Money.
If you or someone you know is beginning to plan his or her estate, the most important step is to contact a qualified estate-planning attorney. Contact our offices today.