Estate planning is an area with widespread confusion that can lead to costly mistakes for you or the beneficiaries of your hard-earned assets. This post summarizes four common estate planning myths.
- I don’t need a lawyer. Estate planning is complex, and the laws – along with your family dynamics – change often. Hiring an attorney to help you navigate the process and enact a proper estate plan for your specific needs, will likely save your family a significant amount money, time, and headache in the long run.
- I’ll have to pay a gift tax if I give someone over $16,000 per year. Anything (except for money paid directly to a medical or educational institution, charity, or to a 529 plan) over the then-current annual gift tax exclusion, and that you give to someone other than your spouse, reduces your lifetime gift and estate tax exemption amount (currently >$12M year). Only after you use up the entire exemption amount would you actually have to start paying anything. That being said, in CT (but not in MA or RI) you would still have to file a gift tax return and then keep track of how much you’ve reduced your lifetime exclusion amount by, so try to stay within the annual exclusion amount if possible.
- A Trust avoids probate. Not necessarily. A trust may avoid probate, if it is fully funded with your assets, but a trust alone will not fully avoid probate. Certain assets avoid probate on their own, e.g., jointly owned property assets that have a separate beneficiary designation, such as life insurance and retirement plans. For your other assets, we generally recommend a trust, and then a full funding of that trust.
- Trusts avoid estate tax. Nope. Most trusts do not help you avoid estate taxes in and of themselves. Very few trusts help you avoid taxes completely; however, many trusts help you create a more tax-efficient estate plan. If you are concerned about estate taxes, be sure to seek qualified legal advice since certain trusts can be used as part of a strategy to reduce and even eliminate estate tax liability.
If you are interested in estate planning, the lawyers at FLS would be happy to help you navigate the complexities and misconceptions to help you properly provide for you, your family, and your business.
For assistance with any legal matters related to your business or estate planning, contact Fournier Legal Services at email@example.com or 860.670.3535 now for a consultation and planning session.
Joseph E. Fournier is an Attorney and a CPA who has more than twenty years of experience in a variety of business legal matters, including start-ups and company formations, drafting shareholder and operating agreements, contracts, employment law, commercial litigation, tax planning and audit defense, and mergers and acquisitions (M&A). He also handles estate planning matters, such as business succession planning, wills, trusts, and probate.