“Reasons Why High School Students Still Need an Estate Plan”

– The federal estate tax exemption amounts are set to decrease in 2026, potentially affecting individuals and married couples with large estates.
– Even people with estates below the taxable amounts should consider estate planning, as it can ensure assets go to their chosen beneficiaries and address income tax planning.
– Basis, or the amount returned tax-free when selling an asset, is an important consideration in income tax planning for non-taxable estates. This is determined by the cost of the asset, the donor’s basis in a gifted asset, or the fair market value of an inherited asset at the time of the owner’s death. – Holding onto appreciated assets until death can help obtain stepped-up basis for income tax purposes
– Selling depreciated assets before death can lock in a higher income tax basis
– 17 states impose either a state estate tax or a state inheritance tax
– State estate tax exemption amounts are generally lower and more restrictive than federal estate tax exemption amount
– Some states have streamlined probate process, while in others it can still be a burdensome process
– Revocable trusts are often used in estate planning to distribute assets without having to go through probate – Revocable trusts do not provide creditor protection for the trust grantor.
– Irrevocable trusts can protect trust assets from claims by a beneficiary’s creditors and in the event of a beneficiary’s divorce.
– Lifetime trusts for beneficiaries can help protect assets from creditor and divorce claims.
– Beneficiary designations for retirement benefits and life insurance should be reviewed regularly to ensure assets go to the intended heirs.
– It is important to update beneficiary designations after a divorce to avoid unintended beneficiaries. – Powers of attorney are important documents for a living person, as they allow a named agent to handle their affairs if they become incapacitated, avoiding the need for court intervention.
– Advance directives provide important instructions regarding life-sustaining treatment in the event of a terminal illness and can be contained in a health care power of attorney or a separate living will.
– It’s important to carefully consider who to appoint as the administrator of assets (Personal Representative/Executor/Executrix or Trustee) and to review fiduciary appointments periodically, especially in situations involving multiple marriages and beneficiaries.
– Relocating to a different state can impact the distribution of assets and the administration and taxation of assets, so it’s important to review and update the estate plan with a qualified professional if establishing residency in another state. – Estate plans should include language to prohibit distributions that could disqualify a disabled beneficiary from government assistance.
– Beneficiary designations should be reviewed to avoid unintentionally disqualifying a disabled beneficiary from government benefits.
– Digital assets, such as cryptocurrency and social media accounts, should be included in estate planning and a digital executor should be named to ensure access to these accounts upon the owner’s death.
– Even with high federal estate tax exemption amounts, estate planning is important for nontax reasons and to ensure assets are distributed according to the owner’s wishes.

Not Worried About Federal Estate Taxes? Ten Reasons You Still Need an Estate Plan