We’ve all heard the saying, “The only two things certain in life are death and taxes.”
The good news is, by creating a will and preparing for the first, you can reduce the burden of the second — both on yourself, and on your heirs.
That’s because creating a will gives you the opportunity to put your affairs in order and ensure you’re in control of your own legacy.
This, in turn, spares your family from a difficult, lengthy, emotional, and often expensive ordeal that’s created if you pass intestate (the legal term for dying without a will).
When you pass intestate, the court takes over and decides how your hard-earned assets will be divided.
When you create a will, you get to decide who gets what.
Tax Trimming Time
But there are other benefits to creating a will. For instance, the opportunity to do some savvy financial planning, allowing you to provide your heirs with tax-advantaged assets, and even create a legacy through your favorite charities by making transformational gifts.
Here’s just one example: You have a retirement plan valued at $10,000, and a savings account valued at $10,000. You want to gift $10,000 to your favorite charity, and leave $10,000 to a child.
If you leave the retirement plan to your child, they’ll end up with less than $10,000, because income tax must be paid on retirement plan distributions received by an individual—even when it’s part of an inheritance. And the portion of the funds your child loses to taxes could be substantial, depending on his or her income tax bracket and how quickly the funds are distributed from the plan.
However, if you gift the retirement plan to a tax-exempt charity, the organization will get the full amount, tax-free. Then you can leave the savings account to your child. They’ll also receive the entire $10,000, tax-free.
Protecting Your Loved Ones
There are a lot of other ways to protect and provide for your heirs (and your favorite causes) by creating a will.
Trusts, life insurance, charitable gift annuities, charitable donations and donor-advised funds can all be used as financial planning tools to reduce the tax impact on your assets.
And some trusts can even help you avoid probate completely, eliminating more unnecessary costs.
Don’t leave your loved ones with a legal or financial mess. Creating a will is too important to delay. Contact an estate attorney, or create your legacy plan right now, using our free online will planning service, LegacyPlanner.
You’ll take control of your own legacy, avoid or reduce probate costs, reduce taxes, and spare your loved ones from unneeded emotional expense.
Creating a will is the smart way to live well … and leave gracefully.