Estate Planning San Antonio TX
While it might not be the most fun thing to do in the world, estate planning could very well be one of the most important. Sure, planning a vacation or deciding on weekend plans is certainly more enjoyable, but dividing up your assets and ensuring a smooth process after you’ve passed can save your loved ones a major headache in the future. All of the money, real estate, and other assets you’ve built deserve to be passed down appropriately according to your wishes.
Despite what you may think, estate planning is hardly just for the affluent. Even if you don’t have large investment accounts or a valuable home to pass on, leaving your loved ones without a solid plan for your assets could result in costly, time-consuming processes that may result in them receiving nothing at all. If you’re not convinced of the importance of estate planning or are on the fence, use this article to understand why it is one of the most important financial decisions you will make in your life.
In this article, we will explore:
- What estate planning is and why it is necessary
- Who should be included in your estate planning
- The tools, resources, and people that can help make the process easy and mistake-free
- Common mistakes to avoid when estate planning
- When you should start estate planning, and how often you should update your plan
What is Estate Planning?
Understanding an Estate Plan
- Naming an executor of the estate to ensure the terms of the will are carried out
- Setting up funeral arrangements
- Establishing a durable power of attorney (POA) to direct other assets and investments
- Potentially setting up trusts accounts in the name of beneficiaries in order to limit your overall estate taxes
- Establishing a legal guardian for any living dependents
- Creating and updating named beneficiaries on plans such as IRAs, 401(k)'s, life insurance, and any other investment accounts
- Establishing the annual gifting to qualified charitable and non-charitable organizations as named in order to reduce the taxable estate
Important Estate Planning Tools
Common Estate Planning Errors to Avoid
While creating an estate plan is a great way to ensure a smooth process after your death, creating a plan that avoids the most common mistakes and snags is crucial. There are many important decisions when planning to protect your loved ones, but having one riddled with errors that could present legal issues will cause a ton of stress in the end.
Be aware of common estate planning mistakes in order to avoid them. So whether you are just starting your first estate plan or updating an existing plan, familiarize yourself with common pitfalls and mistakes so your plan can be flawless while still safeguarding your legacy.
Don’t forget to write your will: Regardless of whether or not you have written one, you have an estate plan. If you die without a written plan, the state of Texas supplies one for your estate, and you may not be too fond of it. Their decisions will be dependent upon your situation. However, it is worth noting that all of your property is not given to your surviving spouse automatically upon your death per Texas law.
Update your plan accordingly: Once you complete your plan, don't simply tuck it away and never look at it again. People move, get married, and have children; life happens. Based on these changes and the likely fluctuation of your own wealth over time, you will need to update your plan according to changes in your personal life. Laws also change and will require you to pay attention to any that are relevant to your plan.
Don’t forget to account for and plan for long-term care: The current average cost for long-term care in the state of Texas is $77,000 annually and could be a substantial element of your estate plan. Failing to plan for long-term care can end up costing you an excessive amount of money you had not planned for. Experienced estate planning attorneys help to mitigate costs and establish a concrete plan suitable to your personal needs and wants.
Don’t neglect your beneficiaries: Simply naming who your beneficiaries are is not enough due diligence to do for your named inheritants. Make sure they understand their inheritance to ensure a smooth process after your death and don't leave them out to dry. If you leave assets to a minor, you must appoint a guardian to help manage the funds until they come of age. Not doing so can result in more legal fees later on, being taken out of the estate, and can result in a higher likelihood of poor financial decisions.
Don’t sleep on the potential tax implications: Taxes are always something you will have to contend with and plan for. Tax implications can get complex, and your estate plan will be comprised of different assets, beneficiaries, wills, trusts, and other different facets. You will need to understand the different tax implications for all of them.
Should you Combine Estate and Financial Planning?
Texas Taxes and Your Estate Plan
Texas is one of 38 states that does not levy an estate tax. However, residents must still adhere to federal estate tax laws.
There is also no inheritance tax in Texas, although other states' inheritance taxes could apply to you if someone in a different state leaves you money so that state's tax laws would be applicable then.
Texas, being the tax-friendly state it is, also has no gift tax. However, residents still must adhere to the federal gift tax, which exemption in 2022 is $16,000 per recipient.
Why Estate Planning is Important
When to Begin Estate Planning
Most advisors are going to recommend starting an estate plan as soon as possible and updating it every three to five years. While starting an estate plan when you're young-especially if you are single and without children-may seem far from your biggest priority, it is always better to start too soon rather than too late.
Regardless of when you start (preferably earlier), it is imperative to update your plan regularly around significant life events. These events can include marriage, buying a house, having children, and notable increases in your personal wealth.
Just like financial planning and investing, the earlier you start, the better. But just like financial planning, regular upkeep and maintenance are going to be required, as both plans often are comprised of many moving parts and span decades.
For help with estate or financial planning, contact one of our PAX professionals today.