Estate Planning

Keeping the Family Wealth Going

By Modern Wealth Management

June 8, 2018

You’ve brought them into the world, watched them grow, cared for their needs, spent money on their wants, and regardless of the fact that they are now adults, you still want to take care of your child(ren) once you are gone.

Those same feelings may also extend to your friends or the children of your friends. The good news is, once you are no longer here to protect them, there are still ways to help ensure their futures will be safe, secure, and hopefully, prosperous. What better way to show your dedication and admiration than to leave those who you love the money and investments you worked for and saved after you die?

How do you do this? The answer is simply estate planning. Most of you have heard that it’s important to have a will, but is that all you need and why is estate planning so crucial?

  1. You’ll stay out of probate court. If you don’t have a proper estate plan, what you may leave for your loved ones is the process of probating your assets. The higher the value of your estate, the higher the cost of probate court. Depending on which state you live in, probate costs can range from hundreds to thousands of dollars. (1)
  2. Dying without an estate plan allows the state to decide who gets what. You most likely know of someone who had a family member or friend pass away without a will. What you may not know, however, is that the state laws will make the decision of how your estate is divided. That being said, it’s important to note that while most state laws usually prefer the spouses, domestic partners, and relatives to receive your assets, why let the government decide who should get what? (2)
  3. Should you have a will? The simple answer to this question is yes. Every adult needs a will. However, many wills are written only after the death of a close friend or relative and while this is a positive outcome during a sad time, the timing may be off. While planning for your death can be a difficult and oftentimes falls to the bottom of priority lists, only you should decide how your assets are divided.
  4. Your heirs are best protected by a comprehensive estate plan (especially children). Estate plans can provide protection against detrimental financial decisions. In the case of minors, estate plans can appoint guardians or conservators to protect the child’s financial interests. (3)

So, are there other ways to make sure your family and friends receive the benefits of your assets rather than the government?

  1. If you have plenty of retirement savings and a solid estate, you could spend your assets, which will ultimately lower your tax liability. Your family is most likely a higher priority than increasing the amount of money you pay to Uncle Sam. But, you need to remember that you may live a long life and you also want to make sure you don’t run out of money before you die.
  2. Gifts may create the same problems if your money and estate has the potential for a long-shelf life. While it’s honorable to give your assets to your loved ones, it’s important to remember that the IRS has limitations on gifting levels. You are allowed to give up to $15,000 to charities or individuals without having to file gift tax returns. The maximum lifetime gift tax exemption is $11.18 million. (4)
  3. Sometimes your friends or family need financial help and if you decide to loan money to them, make sure to write a loan note in order to stay compliant with the IRS. This note should include the loan amount, the date the loan should be paid back, interest rate, and any collateral. Doing this will help you avoid the IRS’s gift classification. (5)
  4. Statistics show that 4 in 5 older Americans suffer from at least 1 chronic disease and need extra care. (6) One option you may consider is paying a family member to provide this home health care as the IRS allows for this and an added benefit is that family member will also build their Social Security earnings record. (7)

At the end of the day, it’s important to discuss these issues with financial advisor and your estate attorney to make sure if any of the above will be helpful in your personal situation. If you’d like more information on how to build a proper estate plan to help protect those who you’d like to receive your assets after you pass away, please contact Modern Wealth Management at 913-393-1000 or schedule a complimentary consultation below. 

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The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.