Women outlive men, make less during their careers and have less in savings due to pay discrepancies and time taken out of the workforce to raise their families.
These are just a few reasons why it is important for you to know the following about estate planning:
Kids Protection Plan Can Protect Minor Children
Minor children can be legally protected with a Kids Protection Plan, which provides parents with important legal tools to name short- and long-term guardians, provide instructions and guidelines for those guardians, and execute medical powers of attorney that allow you to dictate medical care for your minor children in case they are injured and you are not with them.
Wills and Trusts are Essential Planning Tools
A will and a living trust are both essential estate planning tools, and although both can be used to transfer assets upon death, they serve separate purposes. A living trust can take effect while you are alive or after death. It allows you to hold assets for your benefit during your life, which may prove useful if you become incapacitated in the future. A living trust can also be beneficial if you own real estate in another state. A will only takes effect upon death and is used to appoint guardians for minor children, cover assets that are not part of a living trust, and create trusts that kick in after death.
Financial and Health Care Durable Powers of Attorney are Necessary
You need to execute financial and health care durable powers of attorney (advance health care directive) and consider choosing a member of the family if that person is willing to assume the responsibility of making financial and/or medical decisions on your behalf in case of incapacity. And, if you are married or partnered, make sure your spouse or partner does the same because you’ll be the one who is handling things if anything happens to him or her and you want it to be as easy as possible.
Get Life Insurance
Make sure your spouse or partner has life insurance to support you for as long as you will need support and that there’s enough to last your whole lifetime unless you will have your own savings.
Consider an Irrevocable Life Insurance Trust (ILIT)
Don’t own your own life insurance policy as the proceeds will be subject to estate tax after you die. Instead, if your life insurance is designed to pay estate taxes, designate a spouse or other family member as owner or set up an irrevocable life insurance trust (ILIT), which buys the policy and holds the proceeds for beneficiaries. And again, if you have a taxable estate, make sure the same is set up for your spouse’s life insurance.
Update Beneficiary Designations
Keep beneficiary forms for retirement accounts (IRAs, 401(k)s, etc.) up to date, as they determine who receives the assets of each one of your accounts.
Ensure There Are Enough Joint Funds
Make sure there is enough cash held in a joint account to handle any immediate expenses if your spouse dies suddenly. You may not be able to access a deceased spouse’s separate bank account right away.
Utilize Deceased Spouse's Unused Estate Tax Exemption
Surviving spouses are allowed to add the unused portion of a deceased spouse’s estate tax exclusion to their own – which means the surviving spouse can have an estate tax exclusion of up to $23.4 million in 2021. However, this exclusion transfer must be claimed by the deceased spouse’s executor filing an estate tax return. There are other critical items that must happen when your spouse dies that can easily be overlooked. Contact an attorney within a few weeks of your spouse’s death whether you have a sizable estate or not.
Utilize Gift Splitting
Married couples can participate in “gift splitting” during life, which means they can share each other’s $11.7 million lifetime gift exclusion and can each make gifts each year and give more to their children now tax-free.
This article is a service of the Law Office of Keoni Souza, LLC, an estate planning law firm in Honolulu, Hawaii. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That is why we offer a strategic planning session, during which you will get more financially organized than you have ever been before and make all the best choices for the people you love. You can begin by contacting our office today to schedule a planning session and mention this article to find out how to get this $750 session at no charge.
Disclaimer: All information on this website is for informational purposes only and is not legal advice. You should contact an attorney trained to work with families on estate planning matters regarding your specific situation. Use of and access to this website or any of the email links contained within the site do not create an attorney-client relationship between the Law Office of Keoni Souza, LLC, and any users or any other party.