Because there is so much procrastination, some people look for easy answers so that they can at least take minimal action. Is there a single estate planning document that is inherently more important every other? This is a tricky question to answer, because different people have different concerns.
When you plan your estate, you facilitate asset transfers to your loved ones. An asset transfer vehicle is important, but the optimal course of action will vary from one case to the next.
For example, consider the impact of the federal estate tax. This tax carries a 40 percent maximum rate, so it can significantly erode the wealth that you are passing on to your loved ones.
If you are exposed to the federal estate tax, you must execute certain estate planning documents that will reduce the tax burden. Irrevocable trusts are often utilized by people who are exposed to the estate tax.
You could save hundreds of thousands or even millions of dollars if you take the right steps, so these documents could be very important to you.
The federal estate tax credit or exclusion is $5.34 million in 2014. If the value of your estate does not exceed this amount, you have no federal estate tax exposure.
The average person is not going to have an estate that is worth more than $5.34 million. The irrevocable trusts that are so important for very wealthy people would not be utilized by most Americans.
This is just one example. To provide another, let’s say that you have a loved one with a disability who is receiving need-based government benefits. Benefit eligibility could be lost if this person was to receive a large direct inheritance.
You would want to create a special needs trust for the benefit of this family member to preserve government benefit eligibility. This document would be very important.
On the other hand, if you are simply leaving everything to your healthy spouse, there would be no reason to create a special needs trust.
Personalized Attention Is Key
There is no one estate planning document that is inherently more important than any other. The ideal estate plan is going to vary depending on the circumstances.
Personalized attention is the key to a properly constructed estate plan. When you work with a licensed estate planning attorney to construct a plan, it will be tailor-made to suit your needs. The documents that are important for you will be properly executed.
If you would like to discuss your unique situation with a local attorney, contact our firm through this link to schedule a free consultation: Grand Forks, ND Estate Planning Consultation.