When we talk about estate planning, most people think it is something that only the very rich should do.
But this perception couldn't be more wrong.
Estate planning should be considered by people who have considerable assets, although they may not be super rich.
These are the conditions under which you should consider hiring a tax lawyer for estate planning: * If you own one business or more.
If you have a business that will simply stop operating if you get injured or die, you will need an estate plan to protect your business interest for you and your family's sake.
The need to plan your estate becomes even more important if you are partnered with family members and third parties in your business.
* If you have significant amounts in your 401(k) and/or IRA.
Retirement accounts like 401(k)s and IRAs are there to support the cost of your retirement years, they are NOT inheritance money, and thus are not easily passed on heirs.
Retirement plans are built in with significant estate and income tax consequences when they are transferred to beneficiaries after the death of the account owner.
If your 401(k)s or IRAs have at least $200,000 in them, you need to work with your tax attorney to formulate an estate plan for these assets, which balances tax implications with your dying wishes.
* If your life insurance has a significant face amount Nothing can be more wrong than to assume that the proceeds of a life insurance policy are automatically passed on to your beneficiaries tax-free.
While it's true that beneficiaries do not need to pay taxes to receive insurance money, the insurance policy itself will be subject to estate tax if the policy owner is also the insured person.
You need to discuss with your tax attorney how you can minimize the taxes on your life insurance, and how this life insurance policy can be used to pay taxes and provide financial security to your family.
* You have inherited or will be inheriting substantial assets.
If you're expecting to inherit a large amount of money, the right time for an estate plan is BEFORE you receive your inheritance, not after.
Before the assets are officially transferred in your name, work with your tax attorney to minimize the effect of those inherited assets on your current estate.
This is particularly important if you already own assets, or if you are prone to lawsuits because of your job, or if your marriage is teetering on divorce.
If you already have inherited the assets, you can still work with your attorney to minimize estate taxes and protect your inheritance from creditors or your former spouse in a divorce.
Take note, you can only be exempted from federal estate taxes if your estate totals less than $2 million.
However, states that impose estate taxes have different exemptions.
You will need to sit down with your tax attorney to determine your tax liabilities and to draw a plan to minimize them.
But this perception couldn't be more wrong.
Estate planning should be considered by people who have considerable assets, although they may not be super rich.
These are the conditions under which you should consider hiring a tax lawyer for estate planning: * If you own one business or more.
If you have a business that will simply stop operating if you get injured or die, you will need an estate plan to protect your business interest for you and your family's sake.
The need to plan your estate becomes even more important if you are partnered with family members and third parties in your business.
* If you have significant amounts in your 401(k) and/or IRA.
Retirement accounts like 401(k)s and IRAs are there to support the cost of your retirement years, they are NOT inheritance money, and thus are not easily passed on heirs.
Retirement plans are built in with significant estate and income tax consequences when they are transferred to beneficiaries after the death of the account owner.
If your 401(k)s or IRAs have at least $200,000 in them, you need to work with your tax attorney to formulate an estate plan for these assets, which balances tax implications with your dying wishes.
* If your life insurance has a significant face amount Nothing can be more wrong than to assume that the proceeds of a life insurance policy are automatically passed on to your beneficiaries tax-free.
While it's true that beneficiaries do not need to pay taxes to receive insurance money, the insurance policy itself will be subject to estate tax if the policy owner is also the insured person.
You need to discuss with your tax attorney how you can minimize the taxes on your life insurance, and how this life insurance policy can be used to pay taxes and provide financial security to your family.
* You have inherited or will be inheriting substantial assets.
If you're expecting to inherit a large amount of money, the right time for an estate plan is BEFORE you receive your inheritance, not after.
Before the assets are officially transferred in your name, work with your tax attorney to minimize the effect of those inherited assets on your current estate.
This is particularly important if you already own assets, or if you are prone to lawsuits because of your job, or if your marriage is teetering on divorce.
If you already have inherited the assets, you can still work with your attorney to minimize estate taxes and protect your inheritance from creditors or your former spouse in a divorce.
Take note, you can only be exempted from federal estate taxes if your estate totals less than $2 million.
However, states that impose estate taxes have different exemptions.
You will need to sit down with your tax attorney to determine your tax liabilities and to draw a plan to minimize them.