One of the most common reasons people delay creating an estate plan is the misconception that it is meant only for wealthy people. However, Ohio residents should know that they should develop an estate plan regardless of their wealth status. People who die without a plan in place may subject any finances or other possessions to court costs and other fees.
What qualifies as an estate plan can vary from person to person. It may include certain legal documents, such as wills, health care directives or powers of attorney or designating guardians.
One of the first steps that should be taken when creating an estate plan is naming beneficiaries to life insurance policies or retirement accounts. It is important that the designations are reviewed periodically, especially after significant life changes, so that an unintended recipient such as an ex-spouse does not receive the funds.
Assets can be gifted to heirs while the grantor is still alive. Beginning in 2018, individuals can gift up to $15,000 to someone without having to pay a gift tax. The tax-free gift amount doubles to $30,000 if being given by a married couple.
For individuals wanting to assist with the college education of the future generations of their families, instead of leaving a large cash amount and paying a hefty gift tax, they can contribute to a 529 college savings plan. However, the tax break is only in effect if someone other than the parents of the child creates the account.
An attorney who practices estate planning law may advise clients of how estate planning devices, such as trusts, can protect assets for beneficiaries and possibly lower their tax bill. Guidance may be provided regarding what type of trusts, such as living trusts or constructive trusts, may best help clients achieve their financial goals.