Estate Planning for Women: 4 Key Priorities to Consider

8 Minute Read

What happens in an emergency if you are unable to make your own healthcare or financial decisions? Who makes decisions on your behalf if you are incapacitated or hospitalized for a long period of time? Does anyone in your family know how you want your estate distributed?

While these aren’t always easy questions to tackle, your heirs can have the answers at their fingertips when an estate plan is created. An estate plan gives you say in how your assets are given to the people or organizations you care about. According to Charity Babington-Falls, Head of Wealth Planning with The Private Bank at Union Bank, “If you fail to make these decisions while you’re alive and able, state intestacy laws will dictate how your assets are divided among your heirs which is clearly not ideal for most families.” Perhaps you would like to benefit your heirs in a different proportion than is laid out in the statutes. The probate courts who oversee intestate succession will ensure assets are divided as set forth in the law.

Perhaps you would like another person, such as a friend, long-time employee, or aging parent, or even a charity, to share in your estate. “In most intestacy situations, few, if any, intended beneficiaries other than spouses and children will receive anything,” Babington-Falls noted. To ensure your assets such as property, belongings, cash and investments are bequeathed as you wish, an estate plan is necessary.

4 Key Priorities for an Estate Plan

Taking the following four key priorities into consideration will aid you along your estate planning journey:

1. Plan now

The most important aspect of estate planning is just that—to have a plan in place. Think not only about what you want to happen to your assets when you die, but also how you want things managed if you are incapacitated and can’t make decisions for yourself. Getting started can sometimes seem intimidating but having a trusted advisor or wealth manager by your side when creating an estate plan can ease the anxiety.

2. Support without creating dependence

For families, it’s important to think about supporting descendants without creating dependency. “Families often want to give their children and grandchildren a hand up without giving them a handout,” says Babington-Falls. Providing an inheritance without discouraging motivation can be a difficult balance. Designing a trust with this in mind while setting expectations through open communication is an important aspect of estate planning.

3. Name an estate manager

Some women will have a knee-jerk reaction when it comes to naming their children as estate manager or successor trustee, should they become incapacitated. However, it’s important to look at the size of the estate and they types of assets held in the trust and, most importantly, whether the son or daughter actually wants the job. “The individual will have a fiduciary duty to the beneficiaries, and, at times, it can be an overwhelming job, especially if complex assets are involved,” says Babington-Falls. For example, if commercial real estate is held in the trust, is it best to appoint your son or daughter with no real estate management experience, or a professional trustee with a team of asset managers?

4. Taxes

There are two pieces of legislation introduced recently (The 99.5% Act and STEP Act) that could affect estate planning if passed. Those are:

  • The 99.5% Act: This proposed bill would reduce the current federal estate and gift tax exemptions of $11.7 million per person to $3.5 million for transfers at death and $1 million for lifetime gifts. The changes would be effective after December 31, 2021, if the bill is passed.
  • The STEP Act: The STEP Act would impose a capital gains tax on appreciated assets transferred at death, as if the assets were sold for fair market value. Currently, inheritors of appreciated assets receive those assets with a tax-free basis step-up to fair market value, meaning they can sell the assets immediately after a person’s death and pay no income taxes on the sale. If the STEP Act is enacted, it would exempt the first $1 million of asset appreciation from gain recognition, as well as the full value of retirement accounts. Transfers to spouses and charities would also be exempt from imposition of the tax. Other exclusions would apply, such as exempting up to $500,000 additional unrecognized gain on the transfer of a personal residence. Notwithstanding these exceptions to the rule, the STEP Act would impose a steep cost to many heirs’ basis step-up allowance. The STEP Act would apply retroactively to transfers occurring after December 31, 2020.

 

Wealth and estate planning is an essential part of a family’s legacy. Though it can be a complex task with complicated tax laws, you don’t have to take it on alone. Partnering with wealth and estate planning professionals can take away the burden, allowing you to stay focused on your daily life. Consult with your wealth advisor and partner with a licensed estate planning attorney and tax advisor to develop a formal plan that is right for you.

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Wills, trusts, foundations, and wealth-planning strategies have legal, tax, accounting, and other implications. Clients should consult a legal or tax advisor.

This is a publication of The Private Bank at MUFG Union Bank, N.A. (the Bank.) This publication is for genera information only and is not intended to provide specific advice to any individual.  Some information provided herein was obtained from third party sources deemed to be reliable.  The Bank makes no representations or warranties with respect to the timeliness, accuracy, or completeness of this publication and bears no liability for any loss arising from its use.