Stephen J. Kipp, CEO and president of KBD & Associates in Ventura, CA offered the following mistakes to avoid when planning a personal estate.
With increased home values, well-funded retirement accounts, and hefty life insurance policies, many retirees today not only have enough money to live comfortably but are also likely to have wealth to distribute at the end of their lives.
"Planning an estate can be complicated and there are many factors to consider," says Stephen J. Kipp, CEO and president of Kipp Brant Drummond & Associates in Ventura. "While there are many options and intricate details to take into account, there are nine top points to consider when planning an estate."
1. Assuming you do not need an estate plan because you do not owe estate tax.
With estate tax laws in flux, whether your estate is large enough to owe estate taxes may depend on when you die. "Even if taxes are not an issue, estate planning can ensure your assets are controlled according to your wishes if you're incapacitated and parceled out appropriately at your death," Kipp says. "An estate plan also helps to avoid costs and delays of probate while minimizing emotional and financial burdens on beneficiaries."
2. Not having a will.
A will lets you specify who gets what and could help minimize estate taxes. Without a will, state law will govern your probate estate, with the government deciding who gets what. Depending on your state of residence, if you are survived by a spouse and children, your estate will typically be divided among them, even if you had something else in mind. "Without a will, your estate could end up paying more than it should in taxes and legal fees," Kipp says.
3. Not having a final wishes document.
What happens if you change your mind about who gets your favorite jewelry or whether you want to be buried or cremated? "Although it is not legally binding in every state, an addendum to a will, a final wishes document, allows you to provide direction to heirs to help avoid conflicts," Kipp says.
4. Leaving your entire estate to your spouse.
While many couples leave all assets to one another, this is not always the best strategy. Trusts, which come in many varieties, may help you fine-tune your estate plan, and are typically less vulnerable than wills to legal challenges, while still providing asset protection.
5. Owning all assets jointly.
Most couples own property jointly, with rights of survivorship, meaning that upon the death of one spouse the jointly-owned property automatically passes to the surviving spouse, avoiding probate. This may not be the best choice in all situations. For example, owning property separately could make it possible to fund a trust and take better advantage of the estate tax exemption.
6. Not considering annual gifts.
Using yearly gifts to distribute your estate while alive can be immensely satisfying, and it takes advantage of an annual gift tax exclusion that allows tax-free gifts each year of up to $12,000 each to an unlimited number of recipients (if you give with your spouse, the limit is $24,000). The $1 million lifetime gift tax exclusion can be used to make even larger gifts. Any gift provided now avoids potential estate taxes later.
7. Failing to consider the benefits of charitable contributions.
Fulfilling philanthropic goals can also have many tax benefits. Your estate can take a deduction for gifts-including cash, personal property, real estate, and certain investments-made to charitable organizations upon your death (charitable gifts during a lifetime are also deductible, and reduce the size of taxable estates). Other options to consider are a charitable remainder trust that pays a lifetime income to you and distributes remaining assets to a charity at your death, or a charitable lead trust, which reverses the equation, paying the charity now and your heirs when you die.
8. Keeping life insurance in your taxable estate.
"Life insurance benefits are not taxed as income but they do go into your estate and could increase your heirs' estate taxes," Kipp says. "An alternative is to own a policy owned by an irrevocable life insurance trust that can pass along proceeds without tax liability."
9. Failing to update estate strategies periodically.
"Everyone´s circumstances change; wealth may increase or decrease, new children may be born while others reach adulthood, and you could be widowed or divorced and remarry, adding the complications of a second family," Kipp says. "It is important to take the time to regularly review your estate plan and make any revisions necessary when they happen."
About Stephen J. Kipp, MBA, PFP
As president and CEO of KBD & Associates, Stephen J. Kipp leads a talented team of professionals dedicated to making client goals the center of our universe. With more than 35 years of combined professional experience, he has a wealth of diversified knowledge and insight that has helped generations of clients.
Kipp earned the professional designation of Personal Financial Planner (PFP) through the UCLA Graduate School of Management, his MBA from Cal State Northridge and a Master´s in Public Administration from USC. He holds NASD Series 24, Series 7 and Series 63 and Life, Health and Disability License through the California Department of Insurance (CA #0665147).
Deeply involved in the local community, Kipp is dedicated to supporting, working and sponsoring many local non-profit organizations. His support of many of the community based organizations brings a singular approach to clients who also want to be a better part of their community.
For more information, call 805-650-7654, or visit the website at www.kippbrantdrummond.com. For information on brand development, marketing, public relations, advertising or web integration, contact Consortium Media Services at (805) 983-3495 or www.consortium-media.com.
With increased home values, well-funded retirement accounts, and hefty life insurance policies, many retirees today not only have enough money to live comfortably but are also likely to have wealth to distribute at the end of their lives.
"Planning an estate can be complicated and there are many factors to consider," says Stephen J. Kipp, CEO and president of Kipp Brant Drummond & Associates in Ventura. "While there are many options and intricate details to take into account, there are nine top points to consider when planning an estate."
1. Assuming you do not need an estate plan because you do not owe estate tax.
With estate tax laws in flux, whether your estate is large enough to owe estate taxes may depend on when you die. "Even if taxes are not an issue, estate planning can ensure your assets are controlled according to your wishes if you're incapacitated and parceled out appropriately at your death," Kipp says. "An estate plan also helps to avoid costs and delays of probate while minimizing emotional and financial burdens on beneficiaries."
2. Not having a will.
A will lets you specify who gets what and could help minimize estate taxes. Without a will, state law will govern your probate estate, with the government deciding who gets what. Depending on your state of residence, if you are survived by a spouse and children, your estate will typically be divided among them, even if you had something else in mind. "Without a will, your estate could end up paying more than it should in taxes and legal fees," Kipp says.
3. Not having a final wishes document.
What happens if you change your mind about who gets your favorite jewelry or whether you want to be buried or cremated? "Although it is not legally binding in every state, an addendum to a will, a final wishes document, allows you to provide direction to heirs to help avoid conflicts," Kipp says.
4. Leaving your entire estate to your spouse.
While many couples leave all assets to one another, this is not always the best strategy. Trusts, which come in many varieties, may help you fine-tune your estate plan, and are typically less vulnerable than wills to legal challenges, while still providing asset protection.
5. Owning all assets jointly.
Most couples own property jointly, with rights of survivorship, meaning that upon the death of one spouse the jointly-owned property automatically passes to the surviving spouse, avoiding probate. This may not be the best choice in all situations. For example, owning property separately could make it possible to fund a trust and take better advantage of the estate tax exemption.
6. Not considering annual gifts.
Using yearly gifts to distribute your estate while alive can be immensely satisfying, and it takes advantage of an annual gift tax exclusion that allows tax-free gifts each year of up to $12,000 each to an unlimited number of recipients (if you give with your spouse, the limit is $24,000). The $1 million lifetime gift tax exclusion can be used to make even larger gifts. Any gift provided now avoids potential estate taxes later.
7. Failing to consider the benefits of charitable contributions.
Fulfilling philanthropic goals can also have many tax benefits. Your estate can take a deduction for gifts-including cash, personal property, real estate, and certain investments-made to charitable organizations upon your death (charitable gifts during a lifetime are also deductible, and reduce the size of taxable estates). Other options to consider are a charitable remainder trust that pays a lifetime income to you and distributes remaining assets to a charity at your death, or a charitable lead trust, which reverses the equation, paying the charity now and your heirs when you die.
8. Keeping life insurance in your taxable estate.
"Life insurance benefits are not taxed as income but they do go into your estate and could increase your heirs' estate taxes," Kipp says. "An alternative is to own a policy owned by an irrevocable life insurance trust that can pass along proceeds without tax liability."
9. Failing to update estate strategies periodically.
"Everyone´s circumstances change; wealth may increase or decrease, new children may be born while others reach adulthood, and you could be widowed or divorced and remarry, adding the complications of a second family," Kipp says. "It is important to take the time to regularly review your estate plan and make any revisions necessary when they happen."
About Stephen J. Kipp, MBA, PFP
As president and CEO of KBD & Associates, Stephen J. Kipp leads a talented team of professionals dedicated to making client goals the center of our universe. With more than 35 years of combined professional experience, he has a wealth of diversified knowledge and insight that has helped generations of clients.
Kipp earned the professional designation of Personal Financial Planner (PFP) through the UCLA Graduate School of Management, his MBA from Cal State Northridge and a Master´s in Public Administration from USC. He holds NASD Series 24, Series 7 and Series 63 and Life, Health and Disability License through the California Department of Insurance (CA #0665147).
Deeply involved in the local community, Kipp is dedicated to supporting, working and sponsoring many local non-profit organizations. His support of many of the community based organizations brings a singular approach to clients who also want to be a better part of their community.
For more information, call 805-650-7654, or visit the website at www.kippbrantdrummond.com. For information on brand development, marketing, public relations, advertising or web integration, contact Consortium Media Services at (805) 983-3495 or www.consortium-media.com.
