Your Estate: What's In It, What's Not

Everything that you own is part of your estate. Your will is a guide to how you want those belongings to be distributed when you die. It is very important that you will be current and when any changes occur in your life that you update your will. Life moves quickly and these are important documents so keep them current.

A major goal of estate planning is to reduce your taxable estate even as you accumulate assets. By doing this you will pay as little as possible in estate taxes. Having a good idea of your estates value will, while you arestill alive, make the planning of your estate much easier. It will also help you to take care of those you love in the fashion that you intended. Do not forget to include the values of life insurance, your home and all personal and business assets in the calculation. What you may find is that you are worth more than what you thought.

Who can you give your assets too? A beneficiary can be anyone or any organization. Be as specific as possible in naming them in a will, trust, or insurance policy to avoid confusion and conflicts. Generally gifts to pets are not enforceable. Consult a lawyer if you really want to do this.

What’s In Your Estate

Included in your estate would be the following items:

All assets in your name, cash, securities, cars, real estate, personal property, and so on.
The full value of life insurance which includes, death benefits and cash value on variable or whole life policies as well as cash value on universal life policies. It also include life insurance policies you have through your work.
Money that is owed to you. These assets are called income in respect of the decedent (IRD) if they are earnings that are still due or just loans to others. Making a list of the people or companies that owe you money and the amounts owed is helpful.
Any jointly held property, homes, bank or brokerage accounts. One-half of these assets will be included in your estate even if you are married (the assets move tax free to you spouse).
A business
Anything else that’s not in your name but that you have control of. These would include powers of attorney over someone else’s assets or a guardianship situation.

Gifts to a spouse are unlimited transfers at this time. That means that they are free from gift and estate taxes, as long as the recipient is a U.S. citizen. This is also referred to as the marital deduction but in actuality it is a deferral. Any assets that avoid an estate tax when you die may be taxed when your spouse dies.

What Is NOT In Your Estate

Any assets you have given away permanently and completely. This means that you have no control over these assets in any way shape or form. They include:

Gifts to others, whether they are cash or property, the current gift tax rate is $17,000 (2023) per individual per year.
Debts, which is money owed to creditors. This will reduce the value of your estate.
Any assets that have been transferred out of you estate more than three years prior to death. Any assets that are three years or less can be pulled back into the estate and will become part of the estate for taxable purposes.
Trusts. Any asset you transfer into an “irrevocable” trust, which is one that you cannot alter or change in any way is out of your estate. If you have any string attached in any way, which allows you to change any element of the trust it is included in your estate.
Assets placed into a revocable trust remain in your estate because you have reserved the right to take them back. If you move an asset out of your estate but continue to receive income earned from it, the asset will come back into your estate upon your death.

What Happens When You Die?

When you die, assets held in your name alone, the rest and residue, of your estate are distributed according to your instructions. This will not include any assets owned jointly or that are already payable directly to a beneficiary.

It is always best to name beneficiaries in any accounts that you can. It keeps the assets from going into probate and makes distribution of them crystal clear.

Probate is a court run process of distributing your assets after you die. Making any transfers or gifts before you die can save money and time and assure you that the property goes to those you want to receive it. The clearer your intentions are the easier your asset distribution will be. Key points to remember are, jointly held assets held between spouses will move to the surviving spouse tax-free. Any assets with a named beneficiary will move to that beneficiary directly and without contest.

Don’t forget to put all of you requests and wishes in a will. There may be someone out there that will want to contest the will. If everything is spelled out it will go as you planned. Proper planning will make a traumatic experience much easier to handle and it will really let those that you love know just how much you really did love them.