Estate Planning
David Postic
Top 7 Reasons People Delay Making An Estate Plan

According to a survey conducted earlier in 2019, only 40% of American adults have a Will or Trust. That percentage drops dramatically for younger age groups. For example, only 19% of people ages 18-34 have a Will or Trust.

So what’s the big deal?

As Baby Boomers pass away, experts predict that over $68 trillion (with a ‘trill’) in wealth will be transferred over the next 25 years. And the estate planning of those Boomers will control where all that wealth goes.

Despite the hugeness of those numbers and the importance of estate planning, it is easy to procrastinate when it comes to actually setting your affairs in order. Here are the top 7 reasons (in no particular order) people give us to explain why they delay estate planning:

1. “I’m too young.”

First of all, you are never too young to have an estate plan. I wrote a series of articles specifically geared toward estate planning for Millennials. (Or you can substitute “Millennials” for “Gen Z” or whatever weird thing we are on now.)

Whenever young people say “I don’t have enough assets for an estate plan” or “I’m going to wait until I have a family,” what they are really saying is, “I don’t plan on going anywhere anytime soon.” Because young people don’t die, they live forever.

Top 7 Reasons People Delay Making An Estate Plan
Estate Planning, Taxes
David Postic
Everything You Wanted To Know About Estate ...

The Internal Revenue Service (IRS) recently announced that the estate and gift tax exemption is increasing in 2024 to $13.61 million per person, up from $12.92 million in 2023.

The IRS also confirmed that the annual gift exclusion amount is increasing from $17,000 per person in 2023 to $18,000 per person in 2024.

Read more: IRS Rev. Proc. 2023-34

Okay great, you might be saying to yourself. But what does that mean, and why does it matter?

Great questions.

There are a lot of misconceptions about estate taxes and gift taxes — often referred to as “death taxes.” What they are, who has to pay them, how to avoid them.

This article is my attempt to demystify the topic for you and to help you figure out how these tax changes could affect your estate plan.

Everything You Wanted To Know About Estate & Gift Taxes
Estate Planning
David Postic
8 Questions to Prepare Your Estate Plan for 2024

2023 is almost over.

The end of the year is a time for people to gather together with family and friends, to look back on the past 365 days, and to look forward to better, happier things.

People usually don’t want to think about things like—oh, I don’t know—their mortality. Death. Stuff like that.

However, it is crucial to regularly review and, if needed, update your estate plan. The end of the year is the perfect time to do that.

So before you completely wipe 2023 from your memory, ask yourself these 8 questions to make sure your estate plan is ready for whatever 2024 throws at you.

1. Will the right people get my “stuff”?

First, make sure your will or trust correctly states who will inherit your assets.

You should then review your pay-on-death (POD) beneficiaries on insurance policies, retirement accounts, and other assets.

Do they match the beneficiaries in your will or trust?

Related post: 7 Mistakes to Avoid When Naming Beneficiaries

Many people incorrectly believe that a legal document such as a will or a trust controls what happens to all of their assets.

However, beneficiary designations can override those documents.

For example: Your trust may say that your son John will receive your entire estate and that you are disinheriting your other son, David.

But if your insurance policy lists David as beneficiary, he will still get part of your estate.

You should therefore coordinate your beneficiary designations with your will or trust to make sure all of your assets are distributed the way you want.

8 Questions to Prepare Your Estate Plan for 2024
Estate Planning
David Postic
What's the Difference Between a Will and a ...

Lawyers love to be confusing.

We use insane-sounding words from Latin and Greek and some other languages that I’m pretty sure are completely made up.

Words such as testator, force majeure, per stirpes, and inter vivos.

Our words are so weird, we have to italicize them.

So I’m not surprised when someone asks me whether a Last Will and Testament and a Living Will are the same thing.

After all, both documents have “Will” in their names, right? It would only be reasonable to think that they are similar.

But they are not similar. They are very, very different.

So I’m going to cut through the legal jargon and explain the differences between Wills and Living Wills — and help you decide which one might be best for you.

Last Will and Testament vs. Living Will

Before diving into specifics, it’s first helpful to know how to define estate planning:

An estate plan ensures (1) that the right people are able to care for your SELF in the event you become incapacitated and (2) that the right people are able to get your STUFF in the event of your death.

Every estate planning tool fits into one of those two categories, and a good estate plan should address both areas of focus.

And as luck would have it, I will be discussing both categories in this post.

What's the Difference Between a Will and a Living Will?
Estate Planning
David Postic
3 Magic Ingredients in a Great Letter of ...

So you’ve got some nifty estate planning documents?

You are awesome.

Formal estate planning document can ensure your family is cared for after your death, avoid court, and minimize the burden your loved ones will face when you are gone.

But legal documents are only one part of the equation.

Your estate plan is not complete just because you signed some fancy papers.

Because while formal estate planning documents can avoid legal obstacles after your death, they do not eliminate the myriad other tasks necessary to settle your affairs.

Think of it this way:

If you died today, would your family know what to do?

If they couldn’t remember anything you told them about your estate, would they be able to easily find all the information they need?

Read more: Why You Need to Have an Estate Planning Fire Drill

If you answered “no” to either of those questions, then your estate plan is not complete.

To make things easier on your loved ones after your death, the best thing you can do is create an estate planning letter of instruction.

3 Magic Ingredients in a Great Letter of Instruction

Estate Planning

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5 Ways to Avoid Probate

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5 Ways to Avoid Probate

Probate is a dirty word to most people. It's time-consuming, expensive, public, and brings with it the possibility of infighting and costly litigation. So how can you avoid it? The short answer: estate planning. But as we have written before, estate planning is a very broad topic. So here are five ways you can use estate planning to avoid probate:

1. Give away your entire estate.

This might seem like the most logical solution and, sadly, many people do it without thinking of the consequences. If you give away your assets, you also give away control over them. If, for example, you give your home to your child, you cannot control who lives there or if it is sold or mortgaged or seized by your child's creditors — even if you're living there. Giving away your estate may also trigger a federal gift tax. What's more, if you give your child your home as a gift during your lifetime, they cannot take advantage of a concept known as stepped-up basis and could instead be forced to pay large capital gains taxes in the future.

What is a Transfer On Death Deed?

What is a Transfer On Death Deed?

Most people are familiar with deeds. Though they come in many different varieties, deeds convey (transfer) interests in real estate. Generally speaking, a conveyance is effective as soon as a deed is signed. With a transfer-on-death deed, however, the conveyance is effective only after the grantor (the person conveying the real estate) dies.

What are the benefits of a transfer-on-death deed?

The main benefit of a transfer-on-death deed is that the conveyance can avoid probate. Let's say Joe wants to leave his house to his son, Dan. If Joe provides in his Will that the house should go to Dan, the Will must still go through probate before Dan can get the house. But if Joe signs a transfer-on-death deed, all Dan will need to do is file an affidavit (and a death certificate) with the county clerk to obtain title to the house.

Use RMDs to Fund a 529 Account

Use RMDs to Fund a 529 Account

A 529 account (or 529 plan) is a tax-advantaged savings plan designed to encourage saving for future college costs. The different types and mechanics of 529 plans are best saved for another blog post. For now, the important thing to know is that there are three main benefits to using your RMDs to fund a 529 plan:

1. Earnings grow tax-free.

Usually, you have to pay income taxes on RMDs. If you then invest the RMD, you will likely pay a second round of taxes on those earnings down the road. On the other hand, if you contribute your RMD to a grandchild's 529 account, you will still pay income tax on the RMD, but the money you invest in the 529 account will grow tax-deferred. And if the money is later used for qualified education expenses, the entire amount is available tax-free.

Will You Lose Your Long-Term Care Deduction?

Will You Lose Your Long-Term Care Deduction?

We recently wrote about several ways the House GOP tax package could impact your estate plan. However, one area we did not cover is an important proposal that could impact millions of Americans: eliminating the medical expense deduction.

What Is the Long-Term Care Deduction?

The House plan proposes eliminating the deduction (codified in Title 26, Section 213 of the U.S. Code), which generally allows taxpayers to deduct medical expenses (including long-term care insurance premiums) for income tax purposes if the expenses are greater than 10% of adjusted gross income (AGI). But there is a cap on the amount you can deduct for long-term care premiums. The IRS recently announced that, for 2018, taxpayers age 40 and under can deduct a maximum of $420; taxpayers 70 and over can deduct a maximum of $5,200.

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What Is Stepped-Up Basis?

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What Is Stepped-Up Basis?

Nobody likes taxes.

And even though the federal estate tax is not a problem for most people anymore, there is another tax that could drain your estate and reduce what your loved ones receive after your death.

The good news?

By creating a solid estate plan, you dramatically reduce (if not eliminate) the need for your heirs to pay these taxes after your death.

That’s what this post is about: How to legally avoid having to pay taxes.

Related post: IRS Increases 2020 Estate Tax Exemption

[A brief disclaimer before diving in. I will be discussing this issue only at a very basic level and only in the context of estate planning. I am not a tax professional, and nothing in this article should be construed as tax advice. Consult a certified tax professional for all tax-related questions.]

Capital Gains Tax: Explained

America has a type of tax called the capital gains tax which says if you sell a capital asset (e.g., a house, shares of stock, etc.) for more than you paid to buy it, you may be taxed on the difference.

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