We all think about our futures, but how much thought do we put into what happens to our assets when we’re gone.
Dying – or becoming permanently incapacitated — without having a will in place can leave your family saddled with bills, taxes and disputes about where you would have wanted your money to go. So it’s a good idea to put together your will now, and to ask yourself a few questions before you start.
1. What am I leaving behind?
Start by listing anyone who has a stake in your estate: a spouse, children, grandchildren, siblings, etc. Then list your real estate, personal possessions, financial assets.
Once you’ve determined the value of all your assets, you can use that figure – when you subtract taxes, legal fees and burial costs – to figure out individual bequests. You can specify each gift as a percentage of the assets or a fixed sum. The fixed amount option is usually the simpler of the two to carry out.
2. Who will make sure my wishes are followed?
Your will may give roles to three different people depending on your needs: an executor, a trustee and a guardian.
- An executor is the person who administers the settlement of your estate.
- A trustee will manage your assets until they are distributed.
- A guardian cares for minor children.
In the event that you’re somehow incapacitated before your death, you should give someone power of attorney, which allows them to manage your finances according to your wishes.
3. How does a trust work?
A trust is an agreement in which your money or other assets are overseen and maintained by one person to benefit another. A trust can do many things: provide financial support for minor children or charitable organizations, as well as financial safety nets for other beneficiaries. There are living trusts and testamentary trusts. Testamentary trusts are created along with the will and go into effect when the person making the will dies. They are typically used to conserve or transfer wealth and avoid unnecessary taxes.
4. What sort of inheritance taxes will my heirs have to pay?
It depends on the heir. Spouses can inherit assets without paying federal taxes, but taxes can apply to assets passed on to other heirs. Estate tax limits are subject to change. For 2016, the estate and gift tax exemption is $5.45 million per individual.
That means someone can leave their heirs $5.45 million and pay no federal estate or gift taxes. Current tax law allows you to give away $14,000 per person throughout your life without the gift tax kicking in.
5. What if I want to give to charity?
You can leave all or partial interest in your assets to charity that is eligible for tax-deductible contributions. You can find out which charities apply by checking with the IRS.
There may also be rules limiting the amount of tax deduction you’re allowed to take. Gifts given to charity are taxed differently than assets left to a private family foundation.
If you need help crafting your will in Bucks County PA, contact the law firm of Penglase and Benson. Our attorneys are skilled at helping you make sure your family will be cared for when you’re gone.
