Under current federal law, a person may pass everything he or she owns to a surviving spouse without paying any federal estate, gift, or generation-skipping taxes. In addition, a person may pass up to a certain amount ($11.4 million in 2019) to anyone other than his or her surviving spouse without paying any federal transfer taxes.
Individuals whose estate is below the federal threshold may think that because they won’t owe any federal tax, then they don’t need an estate plan. However, even if you have a small estate, the following estate planning tools may be beneficial to you.
You Need a Will
If you die intestate (without a will), state law will determine who receives your assets, and how much each person receives. Even if you do not have significant assets, state law can cause results that you probably would not have intended. For example, under the North Carolina Intestate Succession Act, if you have a wife and a child and die intestate, not everything will pass to your surviving spouse. Depending on how the assets are titled between you and your wife, your child will also be entitled to a share of your real estate and personal property, a result which is probably contrary to what you would have desired. If the child surviving you is a minor (under the age of 18 in North Carolina), the result can be even more complicated because a guardian will have to be appointed by the court to manage the assets received by the child.
You May Need a Guardian
Most couples with young children are extremely concerned about what will happen to their minor children in the event both parents die. A will is one of the best ways for protecting your children because it allows you to appoint during life who you want to take care of your children upon your death. There are two kinds of guardians that can be appointed: guardian of the person, and guardian of the estate. The guardian of your child would be responsible for deciding where your child would live, where the child would go to school, the child’s religious upbringing, and other personal matters. The guardian of your child’s estate would be responsible for managing any assets that have been passed on to the child.
You Might Need a Trust
An effective way to provide for your children is to create a trust that can hold any assets passing to your children until they reach a certain age. Your will could direct your Executor to distribute any assets passing to a child under the age of 25 (or any age you choose) to a Trustee to be held pursuant to the terms of the trust. A trust is an extremely flexible and effective way of providing for a child’s most important needs like education and health care.
You may wonder whether a trust is necessary if you do not have significant assets to put into the trust. But do not forget what may be your most sizeable asset — your life insurance policy. You should carefully review the beneficiary designations on all your life insurance policies. You should consider designating the trust created in your will for your children as either the primary or secondary beneficiary of your life insurance policies. Upon your death, your Trustee could have sufficient assets to invest for your children’s future needs. Before concluding that you do not need an estate plan, know that there is more to it than just taxes!
Free Consultation with a Utah Estate Lawyer
If you are here, you probably have an estate issue you need help with, call Ascent Law for your free estate law consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506