The time will eventually come when each one's estate will be transferred to another person or persons. No one knows exactly when that time will be, but it is often assumed that it will be later rather than sooner. Therefore, many postpone estate planning because it is thought there will be plenty of time to attend to it later. This is a mistake.
Planning one's estate often requires making some difficult decisions. Making these tough decisions can lead to delay in the planning process. However, if a person fails to make the decisions about the transfer of their estate, then the state will make those decisions for them according to statutes under the laws of descent. Even though planning for the estate transfer is not easy, most will want to determine who receives their estate instead of leaving that decision to the state government.
Planning generally starts by compiling an inventory of one's estate. The inventory would include how title is held for certain assets along with an approximate value of each asset. How the title is held will impact the options for transferring the asset. For example, if title is held as joint tenancy with right of survivorship, the surviving tenant will receive that asset. The asset cannot be bequeathed by will to anyone else. If title of an asset is held as tenancy in common, each tenant or owner's share can pass to an heir or heirs under a will. Once the inventory is complete, one will then have a rough estimate of the gross value of the estate and the options available to transfer certain assets. This will be important in determining if the estate will be subject to an estate tax. In addition, preparation will greatly improve the efficiency of time spent with an attorney.
Federal estate tax laws are in a stage of uncertainty. For 2010, there is no federal estate tax on estates of decedents who pass during 2010. On Jan. 1, 2011, the federal estate tax will become 55 percent on the amount of an estate that exceeds $1 million. There is speculation that Congress will pass legislation before the end of 2010 that will change the federal estate tax law. Depending on the prediction one reads, the exemption could increase from $1 million to somewhere between $3.5 and $5 million, and the estate tax rate could be lowered to 35 or 45 percent. Do not let uncertainty of future laws cause you to delay planning. Plan for the worst and hope for the best. Reputable estate attorneys will know the latest developments on estate tax legislation.
Hiring an attorney is an important step in the planning process. Seek an attorney who is competent in estate planning and preferably one who also has knowledge of production agriculture. Your perseverance in finding the right attorney will be worth the effort.
Often there are multiple objectives in planning an estate. Objectives could include such things as reducing estate taxes, minimizing probate costs and transferring assets to those of one's choosing. Caution should be exercised because certain objectives could take priority over providing sufficient income for the owner(s) of the estate.
Once a plan starts to develop and a draft has been completed, it is wise to schedule a time to communicate with potential heirs. Heirs should have an opportunity to respond in case a bequest is actually a liability rather than a blessing. Communication will also ease possible surprise and stress later and give one's heir(s) time to make appropriate plans themselves.
Start planning today if you have not already done so.