INVENTORY YOUR PERSONAL PROPERTY
Personal property is often overlooked in estate planning. It is important for you to have a record of all the items you own in your home. This can be done by going room to room and writing everything down in a list, or can be as simple as going through your house, making a video of all your personal belongings.
As you create your inventory, identify any items that do not belong to you. If something were to happen to you, the last thing you want is individuals fighting over items in your house. The easiest way to prevent such a scenario is to assure that anything owned by someone else is either removed from your home, or properly identified. The same goes for your safe-deposit box.
GOOD POWERS OF ATTORNEY
A properly executed power of attorney is essential. If you are ever unable to handle your financial affairs or make your own medical decisions, a power of attorney will allow a trusted friend or family member to step in and take care of things on your behalf.
Without powers of attorney, your family may be left without access to money to pay for your care, or there may be disagreements between children about the best health care decisions for you going forward.
In a worst-case scenario, families are forced into guardianship court where thousands of dollars in attorney’s fees and costs incur just to appoint someone to make these decisions.
WILL OR TRUST
A will is an important document which directs the court on how you would like your assets distributed after your death. One common misconception is that a will avoids probate, but that is incorrect.
A large portion of estate planning is devoted to avoiding probate because probate administration can be expensive, take many months, and the court filings become public record. Most people take steps to make the administration of their estate cheaper, simpler, quicker, and more private.
Avoiding probate is most commonly done through beneficiary designations or by setting up a living trust. A trust is a legal entity that can be set up to hold your assets on your behalf. Upon your passing, any assets held by your trust are then distributed to your named beneficiaries free of the probate process.
PROPER FUNDING OF TRUST
It is useless to set up a trust unless you place your assets in the trust. It is extremely important that all of your assets are either titled in the name of the trust, or, in some cases, have the trust named as beneficiary.
Many people go to an attorney and have a trust set up, or get a legal form online to create a trust, and then fail to transfer their assets into the trust. Using a trust as your estate plan is akin to cooking soup. Creating the trust itself is like putting a pot on a hot stove, but without transferring your assets to the trust, you fail to put the ingredients into the soup! This common mistake can lead the estate directly into probate court with its attendant costs and delays.
AVOID GIFTING APPRECIATED PROPERTY BEFORE DEATH
Upon your death, assets you own receive what is called a step up in tax “basis.” In other words, if your beneficiaries were to sell an asset they inherit soon after your death, they most likely would not have to pay any capital gains taxes on that sale. However, if you give someone an asset while you are alive, your tax basis becomes theirs. Therefore, when your beneficiary sells the asset, the beneficiary could face substantial capital gains tax liability. For example, if you give your beneficiary a piece of land bought in the 1980s for $10,000 and it is now worth $50,000, they may have to pay taxes on the extra $40,000 if they sell the land based on its new value. If you transfer the property upon your death via a will or trust, your beneficiary’s new tax basis would be $50,000, and they would generally only have to pay taxes on any gains over that $50,000 value.
BURIAL ARRANGEMENTS (SAVE MONEY BY MAKING DECISIONS NOW)
Obviously, upon a loved one’s passing, decisions are difficult to make and emotions run high. Quick decisions can end up being costly. Speak to your family and a local cemetery now about funeral and burial arrangements. It can avoid a lot of confusion and potentially save a considerable amount of money.
DISCLAIMER: CONSULT YOUR PERSONAL ESTATE PLANNING ATTORNEY
Circumstances vary for each individual. The advice given here is of a general nature and may change depending on your location and various other factors. Consult a licensed estate planning attorney in your area for help with your specific circumstances.
There are likely many overwhelming emotions in dealing with cancer and planning for your estate. Taking a few simple steps will take care of your loved ones and leave a proud legacy.
Ryan D. Johnson is an attorney at Johnson & Johnson Law Offices in Las Vegas, Nevada. He specializes in the area of wills, trusts, and estates. He earned a bachelors in finance from the Marriott School of Management at Brigham Young University, and his J.D. from the Boyd School of Law at the University of Nevada, Las Vegas, where he was a staff member of the Nevada Law Journal.