Leaving an inheritance could be a burden to your heirs.
You have started your estate planning.
You want to leave a financial legacy for your children.
Dividing your estate equally in your estate plan seems simple enough.
According to a recent Kiplinger article titled “Are You Forcing Unintended Consequences on Your Heirs?,” leaving an inheritance may be a burden to your heirs.
Traditional IRAs bring with them Required Minimum Distributions and taxes on distributions.
These do not disappear when inherited.
Chances are your children will not have the same tax liabilities.
After tax, some children may end up with a smaller inheritance due to their higher marginal rate.
Real estate issues.
If you have a vacation home, you may hope your children will want to keep it.
Two viable options to consider are to: 1) pass the property through a Qualified Personal Residence Trust, or 2) leave it directly to your children.
Be sure you discuss this with your children in advance.
They will need to be on board with taxes and upkeep.
Collections, alternative investments, and real estate are often sold at auction after death.
Unfortunately, this can result in them being sold for lower prices.
Your family would be left with less.
Make plans early so as to maximize their return on your investment for your loved ones.
Life insurance mistakes.
You may have once held a life insurance policy in an Irrevocable Life Insurance Trust (ILIT).
With a higher federal estate tax threshold (i.e., $11.4 million per persons for 2019), maintaining the ILIT may be unnecessary.
There is no need to overcomplicate things for your loved ones.
However, make no moves without consulting with your estate planning attorney and your impacted loved ones who are ILIT beneficiaries.
A trust can be helpful when bypassing probate.
Be sure your trust meets the needs of your family.
Careless planning can create an unnecessary burden.
Discuss your plans with your heirs and an experienced estate planning attorney to create a plan (or update your current plan) to meet the needs of all parties involved.
Reference: Kiplinger (June 13, 2019) “Are You Forcing Unintended Consequences on Your Heirs?”