If you missed it, here’s a quick update:
Under the American Taxpayer Relief Act signed into law in January 2013, the federal estate tax exemption of $5 million per person was made permanent.
Since the amount is indexed for inflation, if you die in 2013 you can leave $5,250,000 free of estate tax to your heirs, in addition to leaving an unlimited amount to your spouse.
Married couples can leave a combined $10.5 million to heirs.
So what does this mean?
The vast majority of Americans – those with less than $5 million – have nothing to fear from so-called death taxes.
So don’t fall for any of those scary seminars about how you need to buy loads of life insurance or undertake complex legal maneuvers to protect your inheritance from the U.S. government. That’s simply misleading. Those seminars are just trying to get you to spend money on something you don’t need. (One important caveat, however, is that 21 states – although not Florida – and the District of Columbia still levy state estate taxes, so you may still need special tax planning in those states.)
Does that mean that you can neglect your estate planning? Absolutely not. Proper estate planning is more important than ever before. Even if estate taxes are not a concern, there are many, many compelling reasons to plan for your legal future, such as to protect yourself and your family in the event of your disability or premature death.
Without proper estate planning, you can leave your children, a spouse, or other loved ones unprotected. Your plans specify how you want your assets to be distributed at your death, but also spell out who can step up if you are unable to make financial decisions or care for yourself. If you don’t take proper precautions, you may expose yourself to an expensive and intrusive court guardianship, open the door to financial exploitation by a stranger, or not get the care you want and can afford.
The Takeaway: If you’ve been putting off updates to your estate planning documents, now’s the time to get back up to speed. Make an appointment now to get your affairs in order. Need an attorney recommendation? Just ask us!