ESTATE PLANNING UPDATE
Traditionally, most people equated estate planning with tax planning. The reason many people had estate plans done was to reduce or eliminate estate taxes upon their death.
Indeed, 25 years ago the estate tax exemption was only $600,000.00 and the marginal tax rate was 55%. So it was for good reason that many people were concerned with reducing or eliminating this tax. Over the years, the estate tax exemption has increased dramatically. In 2015, that amount is more than $5 million. According to the Tax Policy Center, a nonprofit organization, less than 1% of those who die in the United States in 2013 shall owe federal estate taxes.
While most of us may not have a “tax reason” to formulate or review our estate plan, there are other good reasons for doing so. If you don’t have a Will, the State of Connecticut has provided for you. The laws of intestacy set forth what will happen to your assets upon your death. Some things can only be provided in a Will:
• educational needs for children or grandchildren;
• support for a favorite charity;
• appointment of an executor; and
• appointment of a guardian for minor children.
Your estate plan consists of more than your Will. You should also deal with issues concerning your personal autonomy which may arise while you are alive. Specifically I am referring to a durable power of attorney and advance directives.
In the last few years the laws concerning these documents have been amended. The durable power of attorney can no longer be used to make medical decisions for the principal. It is now basically a financial instrument allowing the attorney-in-fact to make financial decisions on behalf of the principal.
The so-called “living will” statute has been broadened. The document is now referred to as Advance Directives. It includes the appointment of a health care representative. This person is allowed to make health care decisions which are not “end of life” decisions, if the doctor determines the principal is incapable of making such decisions. It also contains “end of life” treatment language (“living will”) as well as the designation of a conservator and language concerning the making of an anatomical gift.
Of course, you should take an inventory of your assets. Not just what you own, but how are the assets titled:
• Solely owned assets;
• Jointly owned assets;
• Assets with designated beneficiaries.
People should also be aware that the State of Connecticut imposes an estate tax on estates valued at more than $2 million. The difference in the exempt amounts ($5+ million federal; $2 million state) creates a potential trap for the unwary.
Estate planning is an ongoing process with many options. While taxes may play a large role in the estate planning process, the family situation plays an equally important part. Laws can (and often do) change requiring changes, some major, some minor, in everyone’s estate plan.
If you would like help in reviewing or preparing your estate plan, please contact Francis J. Farrelly (860) 242-2221 or firstname.lastname@example.org
For more information, please contact Attorney David Baram.