Speaking with an experienced estate planning attorney can mean less income taxes being owed by your estate. Despite the fact that the majority of estates currently won’t have an estate tax liability, most will have to pay income taxes. Many executors are surprised to find out that the top rate of 39.6% starts at just $12,300 of estate income!
The (Beckley, WV) Register-Herald’s recent article, “Estate planning beyond your will,” says that minimizing income taxes through better control of the transfer process and its timing is worth the time and effort.
Retirement fund accounts, like IRAs, life insurance, and annuities have beneficiaries listed to designate the person who will receive the funds after the owner’s death. In many instances, the beneficiary is the person’s estate (as a default), but anyone can be listed, including a charity or nonprofit organization.
If you want to update the beneficiary on these types of accounts or policies at any time, the company’s change of beneficiary form needs to be completed. Note that this doesn’t impact the current use of the account or policy. These accounts and policies are a great way to support a favorite nonprofit organization after you pass away, like the ALS Association to help fight Lou Gehrig's Disease.
When a nonprofit like the ALS Association is listed as the beneficiary, no income or estate taxes are owed by the estate, so more funds will be available for other uses. This makes using retirement fund accounts a wise choice for charitable gifts made through your estate. Affecting the transfer of these types of assets by use of a beneficiary form also lowers estate administration costs, and this typically means that the assets will be transferred more quickly to the recipient in a simpler process.
US savings bonds can also be used to benefit others as an estate gift. You can make a family member or friend the surviving beneficiary of one or more bonds with a form available from the U.S. Treasury. The future beneficiary doesn’t become a co-owner of the bond or have any control during the owner’s lifetime. Treasury Department rules don’t allow nonprofit organizations to be named surviving beneficiaries on savings bonds, but a gift provision included in a will can make a charitable gift of the bonds.
Getting to know how these different assets are controlled will help you become more savvy and efficient with your estate plans.
Reference: The (Beckley, WV) Register-Herald (November 23, 2016) “Estate planning beyond your will”