There has been a lot in the news lately about estate taxes. The media has certainly been discussing it, as have attorneys that we business owners mingle with, but is this really a relevant conversation? In 2009, less than 4,000 people owed federal estate taxes, and today the federal limit is much higher at $5,000,000 per person. So why all the fuss?
Could it be that once again we are being distracted by things that really are not important to us, rather than focusing on issues we actually need to solve? It has been said that 99 percent of what we worry about never happens. It is the thing we do not focus on, that we do not plan for, that really impacts us, quite often in a negative way.
Let’s have a real conversation about estate taxes and estate tax planning. Estate taxes and planning, at least for business owners, is really about legacy desire and distribution. Please don’t get me wrong, if you are a resident of New York and are worth more than $1,000,000 at death, you certainly have to concern yourself about possible taxes due to NY State if you plan to pass on the wealth to someone other than your spouse; thus, some tax planning is needed.
It’s just that for the majority of us, these legal documents are not about taxes. They are about passing on our values, keeping control in difficult situations and easing the burden for loved ones when we pass by putting in print what we want to happen with our worldly goods and possibly our beloved children.
A little more useful detail about these estate planning documents in English, not legalese:
Three important documents
A will basically dictates to your family and/or friends where the stuff that has no label goes when you die. Things like your minor children (small thing), cars, personal possessions in your home, etc.
A power of attorney is a document that allows another person to actually legally become you, take on your identity and make decisions about your physical property, investments, cash, bank accounts, etc. This can be very useful.
Let’s think of a pleasant concept. If you are in Jamaica for six weeks and someone needs to write a check for you, who has that authority? If you miss a mortgage payment, that affects your credit report. It is a tool that allows you to leverage trusted individuals to help control your assets when it is inconvenient for you. Please make sure to have this for yourself and your spouse, as well as for unmarried children over the age of 18.
A health proxy appoints a trusted person to become our advocate and make decisions about our body when we cannot speak for ourselves. I repeat, please make sure to have this for yourself and your spouse, as well as for unmarried children over the age of 18.
These three basic documents are recommended for any person who has children and has things that they want to give away in a specific way.
A few words of caution
Do not use your family attorney or real estate attorney to draft these documents. Use an attorney who specializes in trust and estate work to start and finish this process.
Involve your life insurance broker and your corporate attorney if you will be discussing your business in the will.
Make sure not to do this alone. Involve your spouse, family and business partners so that your intent is clear.
*All legal advice given by Jeanne Brutman is just opinion. Please consult with your legal professional for a more thorough discussion of what is appropriate for you.
Jeanne Brutman is a financial planner and a business owner advocate. She is a member of the New York City Association of Insurance and Financial Advisors as well as the Million Dollar Round Table, which represents the top one percent of the financial services industry. She can be reached at firstname.lastname@example.org and through her website, askjeannebrutman.com.