By The Galecki Financial Management Team
Making arrangements for passing down your assets after death may feel like a grim task, but it really shouldn’t be. Estate planning involves crafting strategies to manage distributions from your estate according to your wishes. It addresses legal issues, tax mitigation, and potential conflicts among your intended beneficiaries. As Benjamin Franklin famously said, “In this world nothing can be said to be certain except death and taxes.” So, you might as well prepare for both!
Preparing a blueprint for the seamless transfer of wealth can give transparency and direction for future generations’ management of your legacy. Take a closer look at the power of thoughtful estate planning.
Types of Estate Documents
We first would like to give a brief overview of the different basic types of estate documents:
Last Will
This is a public document that is presented to the county judge whereby your appointed executor (personal representative) of your estate is approved and guardianship of any minor children is granted. The executor works in conjunction with the Court to handle tangible property distributions, bequests, gifts, payment of debts, and the distribution of all residual estate assets in accordance with the terms of your Will.
Revocable Trust
This is a private document that details exactly how you’d like certain assets handled during life and distributed at death. All terms of the trust are shielded from public records. This is a shell document that is used to protect assets from the probate process.
Power of Attorney
This document appoints an Attorney-in-Fact. This is the individual who conducts financial affairs while you are still alive but unable to do so yourself.
Healthcare Representative / Healthcare Power of Attorney
This document appoints a healthcare representative. The representative makes healthcare decisions on your behalf if you are incapacitated. This power includes decisions on artificially supplied nutrition and hydration (life support). We recommend having these end-of-life conversations, explaining your wishes, with the representative you choose.
Living Will
This is a non-legally binding document that indicates in writing your desires surrounding artificially supplied nutrition and hydration. The actual decision on your care is still made by your healthcare representative.
Guardianship and Trusts for Minors and Other Dependents
If your beneficiaries include minor children, naming a guardian to watch over their affairs is vital to estate planning. A guardian takes responsibility for minor children after their parents or primary caretakers pass on. The role of a guardian is different from that of a trustee who keeps money or assets for children, but a single person may be both guardian and trustee.
In estate planning, you can name a guardian for your children via your Will. The Court then oversees the nominating process in court after the death of a parent. Unless the judge finds your designated guardian to be unfit—which only happens in exceptional cases—they should work with parties to see that your wishes are carried out.
Minor children cannot hold assets in their names until they reach the age of majority. The Trustee would manage the funds until the minor reaches that age of majority. In Indiana, that age is 18. You may also consider setting up a Trust for any minor children if you want their inheritance sheltered for longer than their age 18. Some common age distributions we see are 25, 30, and 35. There are many ways to design a Trust, and it all depends on your asset distribution goals.
Distributing Assets As You Intend
In estate planning, it’s crucial to take certain steps to verify your wishes for asset distribution are followed. This involves communicating your intentions clearly through legal documents that are prepared according to state law. These documents are commonly the ones we reviewed above. However, you also need to review your beneficiaries on life insurance and retirement accounts to ensure the beneficiaries you’ve named still meet your wishes.
You may also consider adding a Transfer on Death designation to any accounts owned in your individual name so your inheritors can receive your assets without the probate process. Avoiding probate can save considerable time and legal costs and keep the process private.
Each estate is unique, so the strategies used to meet your asset transfer goals will vary from person to person.
Estate Tax Reduction and Avoidance Strategies
In 2024, an individual can leave at death or give during life $13,610,000 to their beneficiaries without incurring estate taxes. This doubles to $27,220,000 for married couples. If your estate may be subject to estate taxes, there are many strategies to choose from to help lessen or eliminate the tax burden.
A few estate planning techniques:
- Give annual gifts to beneficiaries during life.
- Create a Credit Shelter Trust (CST) or a Generation-Skipping Trust (GST).
- Establish a Grantor Retained Annuity Trust (GRAT).
- Set up a Qualified Personal Residence Trust (QPRT).
- Execute an Irrevocable Life Insurance with a corresponding life insurance policy.
- Make charitable donations outright, through a donor-advised fund, or other types of charitable trusts.
Find a qualified financial advisor to guide you through your tax-advantaged options.
Guiding You Through the Estate Planning Process
Galecki Financial Management has many resources at hand that can help you, your family, and your inheritors navigate the estate planning process. Get in touch with us today to craft a comprehensive estate plan with personalized, Fee-Only services. To schedule a meeting, call (260) 436-8525 or email [email protected].
About Galecki Financial Management
At Galecki Financial Management, we help individuals and families confidently pursue their financial goals. We’re anything but a business-as-usual wealth management firm. We’re different. Friendly. Casual. And really good listeners. Indeed, that’s a big part of what makes us different. Everything we do is based on what we hear from you, because our experienced team of professionals specializes in comprehensive financial planning, cash flow analysis, IRA rollovers, financial services, money management, estate planning, retirement planning, and advising. We help you identify your short- and long-term goals, and then we work together to pursue them. Lastly, and most importantly, we’re Fee-Only, meaning we’re only compensated for our time. Our only incentive is to help you succeed.
