As the summer draws to a close, that fall back-to-school feeling comes back for many of us and it’s an excellent time to put your estate planning in order and see if any updates should be made.
Consider the following:
- Changes to your estate plan may be warranted if, for example, a marriage ended, you sold a major asset or business, you became a grandparent, you received an inheritance, you retired, you have concerns about whether a certain beneficiary can manage his or her inheritance, or the person you named as an Executor, Trustee, or power of attorney or health care agent should no longer be in that role. Your asset structure and account beneficiaries should also be reviewed to make sure they reflect your wishes and coordinate with your estate plan.
- Save your family the expense and delay of probate by updating your estate plan to include a revocable trust so your assets pass to your loved ones quickly and you reduce the cost of administering your estate.
- Very wealthy individuals should consider taking advantage of the historically high Federal gift and estate tax exemption (i.e., the maximum amount you can give without paying Federal gift or estate tax: $13,610,000 in 2024) by giving away their Federal exemption amount before it is cut in half in 2026. As the Federal estate tax rate on amounts over the exemption is 40%, those whose assets exceed the looming reduced exemption should take action before 2026. There are a variety of ways to make gifts we can explore with you. The sooner you act the more options you have to save estate taxes for your family.
- Don’t forget that some states have an estate tax and a much lower estate exemption (for example, New York is $6,940,000 and Maryland is $5,000,000 this year) and despite the now large Federal exemption there could be a state estate tax in your estate. (New Jersey has no estate tax for some family members, Virginia and Florida has no estate tax, and Connecticut tracks the Federal exemption).
- If your estate is taxable and you want to reduce the taxes your family will pay, or you just want to help a family member or friend, you can make annual tax-free gifts to as many people as you would like. You can give $18,000 per recipient in 2024 ($36,000 for a married couple). These annual gifts, as well as direct tuition and medical payments, do not use up your Federal exemption. Gifts can be made outright, in trust, or to a 529 college savings plan.
- For those who have children who are going back to school, it is important to understand two things that may surprise you. First, once your child is 18 years old, the child’s medical information is protected under privacy laws and you as the parent may no longer be able to speak to his or her doctors without the child’s consent. While by law you do have certain rights as a parent if he or she is incapacitated, a simple authorization form can make what may be a stressful situation more manageable. Finally, you are not entitled to communications from the school, including grades, unless a specific authorization is given by your child: check with the school to learn the procedure. As to financial matters, your child may have accounts in his or her own name that you need to help manage from afar and a power of attorney may be useful. Remember that “custodial” accounts (Uniform Transfer to Minor Accounts or “UTMA”) must end at age 21 and if a large balance has built up it may not be wise for a child to have unfettered access to it.
Should you have any questions regarding the above, please contact the authors, the Garfunkel Wild attorney with whom you regularly work, or contact us at [email protected].