Estate planning can be uncomfortable but taking the time to plan will ensure your financial wishes are carried out and ease the burden on your loved ones when you’re gone.
What is an Estate Plan?
An estate plan is a set of documents that dictate what will happen to your estate (bank accounts, home, vehicles, and other assets) when you pass away. More than a will, an estate plan encompasses trusts, power of attorney, your living will, and more. This is created with the help of an attorney and a financial planner or accountant.
Estate Tax Planning
When your estate plan is carried out, you may worry about leaving your loved ones with a large tax burden. The good news is that as of 2019, estates valued at less than $11.14 million are not subject to taxation before it is bequeathed to your heirs. In addition, inherited funds are not subject to federal taxes and North Carolina does not impose state taxes on inheritance.
Estate taxes are a complex matter and this does not mean that there will be no taxes on the assets you leave to your loved ones, but it does mean that the large tax bills most people anticipate are not likely to apply. Any income generated by an inheritance is taxable and any capital gains from the sale of property are subject to taxation.
Establishing a Trust
A trust is an agreement that allows a third party (called a trustee) to hold assets on behalf of your beneficiaries. There are several benefits to establishing a trust, most notably the fact that they can specify exactly how and when the assets are passed to heirs. Trusts also allow assets to be passed on faster that they would be without a trust and can reduce the tax burden on your heirs. While a trust is typically established with the aid of an attorney, it is wise to have an accountant assist in its creation.