January is coming to an end and it’s a time when many people turn their attention from the festivities of the holiday season to the far more serious issue of tax season in California. While tax season and estate planning may not, at first glance, seem closely related, a change in the tax law impacts how one may structure one’s estate plan. The estate tax exemption increased dramatically, which affects how much money can be gifted. The new exemption amount is $11.18 million per person.
Avoiding taxes and protecting assets used to be one of the prime motivators people used to create an estate plan. With the increased exemption, people can focus more on what they want their money to do in the long term and who they want it to benefit. A couple revisiting their plan 18 years after it was initially created found they could focus less on tax issues and more on avoiding probate, privacy for their family and planning for the long term use of their assets.
Part of the planning involved setting up trusts for minor children so that a trustee controls the asset until the child is old enough to take on the responsibility. The trustee has authority to provide emergency funding, money for education or funds for a downpayment on a house. These amounts would be subtracted from the amount of the bequest.
Estate planning can be a process fraught with emotion as it forces one to consider one’s own mortality, and that is not an issue many people are comfortable facing. Taking a positive view and looking at how one’s accumulated assets can benefit loved ones and cherished causes can alleviate some of that emotion and put an estate plan in a more positive light. An experienced professional in California can help review a person’s overall estate and arrive at a plan that accommodates one’s final wishes.
