Who Needs Estate Planning in 2023?

Who Needs Estate Planning in 2023?

December 13, 2022

Having a comprehensive retirement plan is one of the most important ways to help ensure financial freedom. But don't forget to include an Estate Plan.

Retirement planning paves the way for achieving life goals, managing medical emergencies, and becoming financially independent. Imagining life at 70 or older is one of the most challenging aspects of retiring. What many Americans don't realize is that, in addition to investing, estate planning is a crucial component of your retirement planning. Many people ignore succession planning or put it off until the last minute. Both are developing an estate plan, and a retirement plan is crucial. Your retirement plan will enable you to establish a sizable corpus for your stress-free retirement life.

What is Estate Planning?

Effective estate management enables you to manage your affairs during your lifetime and control the distribution of your wealth after death. An effective estate strategy can spell out your healthcare wishes and ensure that they're carried out – even if you are unable to communicate. It can even designate someone to manage your financial affairs should you be unable to do so. 

Being intentional with your estate planning is a gift to your loved ones. Doing so not only benefits them, but it can also provide a great deal of peace for you, too. Consider these five tips below to determine whether you feel your estate planning is up to speed and to help ensure a seamless transition of assets once you're gone.

Who Needs Estate Planning?

Everyone with assets should have an estate plan. Whether that be millions of dollars tied up in real estate or your family car, an asset needs to be passed down. 

Having an estate plan ensures your wishes, goals, hopes and dreams are possible for your family well after you are gone. An estate plan is the foundation to leave a legacy for your community and the world around you.  As you think about using your assets to benefit your loved ones after you're gone, consider having these items in place.

A Will

A Will is essential to ensuring that your decisions are honored after you are gone. You’ll need to select decision-makers, people who will act as executor and/or trustee of any trusts created in your Will. Without a will, most of the assets you own will go through your state's probate process, which could be a confusing, drawn-out experience for your loved ones. And it's unlikely that the results will reflect your wishes for your assets.

Retirement Plan Beneficiaries

If you own an IRA or employer plan account, like a 401(k), you probably designated a beneficiary when you opened it, which could have been decades ago. Take a look at the beneficiaries your financial companies have on file and make sure they reflect your current wishes.

Power of Attorney

The most basic tool to ensure that if you become disabled mentally or physically, your assets can be accessed and managed with the least expense and without court intervention is a power of attorney. The powers that you grant in a power of attorney are broad and are intended to permit the attorney-in-fact to step into your shoes.

Healthcare Directives

Healthcare decision making is also an important part of estate planning. Like the power of attorney, having documents in place in advance ensures that you’re able to retain control and have a voice in your own health care decision-making for as long as possible.

Other Considerations - Note Your State's Estate Tax Laws

Estate planning is often a way to minimize estate and inheritance taxes. But most people won't pay those taxes.

  • At the federal level, only very large estates are subject to estate taxes. For 2021, up to $11.07 million of an estate is exempt from federal taxation. In 2022, up to $12.06 million is exempt. What if you have a larger estate that surpasses the federal tax exemption limits? You may want to consider a grantor retained annuity trust, or GRAT, a type of irrevocable trust that can help reduce the amount of taxes your heirs pay.

  • Some states have estate taxes. They may levy estate tax on estates valued below the federal government’s exemption amount. If you live in Connecticut, the exclusion amount in 2022 is $9.1 million. Even though there is no Colorado estate tax, Colorado death tax, or Colorado inheritance tax, there are still tax-related concerns for many people when it comes to estate planning.Some states have inheritance taxes. This means that the people who inherit your money may need to pay taxes on it.

Final Thoughts

Estate planning is not simply who gets your stuff when you die. Sure, that’s a part of it and an important part. But estate planning also includes planning for yourself in the event of your incapacity.

Working with a financial planner is a great way to ensure that your finances are in good standing now and in the future. It's important to have a trusted advisor at your side when it comes to your family's finances—someone who can help you make informed decisions about estate planning, retirement planning, and everything else in between. At Agemy Financial Strategies, we're here for you! We've been helping our clients live better lives for over 30 years and we're ready to help you, too.

Our mission is simple: we want our clients to feel confident knowing they have someone looking out for them and their estate planning needs. To schedule a consultation and discuss your options for estate planning, contact Agemy Financial Strategies here today.