Many people understand that they need a “Will” to transfer their property to someone else after they die. They do – but that’s not the whole story. Property can actually be transferred in several ways: by contact, by operation of law, and by a will or trust. You should understand into which categories your various assets fall so you can be sure that your wishes will be carried out.
Some “Top” Things to Know
1. Discussing your estate plans with your heirs may prevent disputes or confusion. Inheritance can be a loaded issue. By being clear about your intentions, you help dispel potential conflicts after you’re gone.
2. The federal estate tax exemption – the amount you may leave to heirs free of federal tax – changes regularly. The estate tax hit $3.5 million in 2009, but was phased out completely in 2010 – but only for a year. Unless Congress passes new laws between now and then, the tax will be reinstated in 2011 at $1 million.
3. You may leave an unlimited amount of money to your spouse tax-free, but this isn’t always the best tactic. By leaving all your assets to your spouse, you don’t use your estate tax exemption and instead increase your surviving spouse’s taxable estate. That means your children are likely to pay more in estate taxes if your spouse leaves them the money when he or she dies. Plus, it defers the tough decisions about the distribution of your assets until your spouse’s death.
4. There are ways to give charitable gifts that keep on giving. If you donate to a charitable gift fund or community foundation, your investment grows tax-free and you can select the charities to which contributions are given both before and after you die.
CNNMoney.com. (2010). Money101 Lesson 21: Estate planning. Retrieved September 14, 2010, from http://money.cnn.com/magazines/moneymag/money101/lesson21/