Estate tax is the fee that the federal government assesses when property transfers, because of death, from person to person. While laws change and estate tax has even been repealed in the past, it is always a good idea to know the basics of estate tax planning.
Organize your personal information: Keep an updated contact list of all family members, and make sure to include children from previous marriages or relationships. This applies to your spouse, yourself and any adopted children. If children are married, include their spouses, as well as any applicable children.
List financial assets with their values that you hold jointly or by yourself. These include your personal residence (regardless if there is a mortgage), automobiles, jewelry, art, antiques, coins and other collections, as well as any personal effects. In addition, list all your bank accounts, certificates of deposit, money market accounts, pensions, retirement accounts, profit sharing accounts and life insurance policies.
List business assets, interests and investments. If you have an interest in a corporation or are involved in a partnership, chances are you have an attorney already who handles these matters. Make sure you know where this information is, how to access it quickly, and always keep your own records of stocks, bonds and other investments you own. In the case of a family-owned business, make sure all proper legalities are in place.
Assign guardians for minor children. Because individuals under 18 have limited legal rights, it is important to assign a guardian of the minor(s), a guardian of the estate and a trustee. These can be the same person and is usually done by creating a will.
Assign an executor. This is an important step, because without assigning a trusted and capable executor, all your plans could be for naught. Having an executor has nothing to do with how much or how little your estate is worth.
Because your estate may incur state taxes in addition to federal taxes that affect estate tax planning, make sure you know the appropriate tax laws that govern your state in relation to your estate. Consulting a tax professional or attorney is always a good idea. Not only will that help you learn and understand the laws, but it will help implement your estate tax planning strategies, as well.
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