New Year, New Plan?

New Year, New Plan?

Since 2012, the lifetime exemption amount that every individual can transfer free of estate tax during their life or at death has increased, not only through congressional action but from inflation adjustments coming every January like a New Year’s gift. For the 2021 tax year, the number now stands at $11.7 million per person or $23.4 million for a married couple.¹ A side effect of the ballooning exemption amount is that it removed some of the urgency around estate planning for those with assets below the lifetime limit. The “’leave it all to my spouse” plan was fine for most couples. With the Democrats assuming control of Congress, it almost certainly means that tax law changes are coming, specifically changes to the generous lifetime exemption amount. And while that may not happen until next year, now is a good time to review your unused exemption amounts and decide if you want to deplete some or all of it while you still can. It is also the ideal time to begin your estate planning in earnest if you have previously avoided it.  

Estate planning is much more involved and offers more benefits than simply a plan to reduce your tax bill. Some of those benefits include:

• Providing for guardianship of minor children

• Making sure your assets are distributed according to your wishes

• Minimizing the potential conflicts among your heirs

• Controlling your assets while you are alive but incapacitated

• Controlling your assets after your death

• Avoiding the lengthy and costly probate process

At Sand Hill, we encourage clients to work with an estate planning attorney to develop an estate plan that is appropriate for their needs. Everyone with assets and a family should consider having the estate planning basics in place such as:

• A Will: Provides for the division of your property and the care of minor children. A will does not cover community property, life insurance proceeds or retirement accounts.

• A Living Will: Provides specific instructions about the medical care you do or do not want in the event you become unable to communicate your wishes on your own behalf.

• A Health Care Proxy or Medical Power of Attorney: Gives whoever you select the power to make medical decisions on your behalf when you can no longer make them for yourself.

• A Durable Power of Attorney: This allows your agent or attorney-in-fact to act on your behalf in a number of financial matters including investments, real estate, banking, taxes, and gifting. It is deemed “durable” as it remains in force whether or not you are incapacitated. The DPOA can be either effective immediately or “springing” and only become effective at incapacity.

• Revocable Living Trust: Created to hold and own the assets of the individual who established the trust, changes can be made while the owner is alive. The trust spells out what should happen to the assets in the trust while the owner is alive and well, when the owner is incapacitated, and when the owner dies.   

If you are not currently working with an estate planning attorney, we are happy to make an introduction and help you prepare for your initial and subsequent meetings. Depending on the size of your estate, your planning needs will vary. Some considerations include:

• If you are married, is it a first or second marriage?

• Do you have children? Do any of them have special needs?

• Do you have any philanthropic goals?

• Do you own a business and if so, have you thought about succession planning?

Once your estate plan is in place, it is important to review it periodically to confirm that it is still consistent with your goals. Your Sand Hill Wealth Manager will prompt you from time to time to make sure this critical step in the financial planning process is not forgotten. If you have any questions about your current estate plan, please call your Wealth Manager or your estate planning attorney to discuss further.


1-www.irs.gov

Articles and Commentary

Information provided in written articles are for informational purposes only and should not be considered investment advice. There is a risk of loss from investments in securities, including the risk of loss of principal. The information contained herein reflects Sand Hill Global Advisors' (“SHGA”) views as of the date of publication. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessarily come to pass. SHGA does not provide tax or legal advice. To the extent that any material herein concerns tax or legal matters, such information is not intended to be solely relied upon nor used for the purpose of making tax and/or legal decisions without first seeking independent advice from a tax and/or legal professional. SHGA has obtained the information provided herein from various third party sources believed to be reliable but such information is not guaranteed. Certain links in this site connect to other websites maintained by third parties over whom SHGA has no control. SHGA makes no representations as to the accuracy or any other aspect of information contained in other Web Sites. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. SHGA is not responsible for the consequences of any decisions or actions taken as a result of information provided in this presentation and does not warrant or guarantee the accuracy or completeness of this information. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) redistributed without the prior written consent of SHGA.


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