Dear Client:

Frequently, we find clients don’t think that they need an estate plan or a will because they are not in the “ultra-rich” category or perhaps because their total estate is less than the current estate tax limits. For 2023, thanks to the Trump tax cuts in 2017, that limit is $12.92 million. Regardless of whether you are among the “ultra-rich” or not, we believe that an estate plan and a will are essential for many reasons. Those reasons include:

1.    A will establishes your wishes that, by law, will be honored after your death. Without a will, state law dictates the distribution of your assets, which may not align with your intentions.

2.    If you have minor children, a will allows you to name a guardian to care for them in the event of your untimely passing and who will be responsible for their care and the safeguarding of their assets.

3.    Wills can help your heirs avoid probate. Probate is a costly and time-consuming legal process. Avoiding probate will not only help save your heirs money, but it will speed up the legal process and help them avoid the bureaucratic grief and hassle that comes at a time they are least equipped to emotionally deal with it.

4.    Even if you are currently under the estate tax threshold, there is no guarantee that the limit will continue. The current estate tax limits are due to decrease significantly in 2025 ($5 million adjusted for inflation).

5.    The process of estate planning also gives you an opportunity to discuss with your heirs your desires for the disposition of your assets. We have found over the years that it is not uncommon to have a family member pass away and to have their remaining heirs have no idea of how family assets should be divided and disposed. Although it may not be a comfortable discussion, we strongly advise our clients to make sure they do a good job of communicating their wishes.

6.    Proper estate planning can ensure that estate tax limits are doubled (i.e. 24m not 12m).

There is a very useful and effective tool called a living trust that gives you control over your assets while you are alive and will also allow the avoidance of probate upon your passing. The living trust is also flexible, so changes in your situation can be updated as circumstances change.

It is also important for you to consider IRAs and other Pension Plans when developing an estate plan. IRAs and other Pension Plans are distributed separately and, not necessarily, according to your will. Accordingly, it is important to separately address your pension plans and make sure you understand the distribution instructions that are contained in your pension paperwork.

We have found that clients are often concerned about the cost of developing a will and living trust. In truth, if managed well, this process is fairly inexpensive and worth the time and effort. We know several estate attorneys that are affordable and provide excellent advice and assistance and would be happy to recommend them.

Estate planning is not a one-time event but a process that you should review and update regularly to accommodate life changes and fluctuations in estate and death tax rules. Should you decide to engage an attorney, we always appreciate participating in that process as we often have ideas and suggestions that should be incorporated and considered.



If you have any questions or concerns about estate planning, please do not hesitate to call us at 505-232-3275.

Sincerely,

Larry Filener, CPA

Southwest Accounting Pros, LLC