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Women and Estate Planning: Part 2
January 22, 2013
Filed under: Estate Administration,Estate Planning,Estate Taxes and Lifetime Gifts,Financial Planning,Living Trust,Living Will,Long Term Care — Tags: "Asset Protection", "Bloomfield Hills", "Christopher Berry", "Divorce", "Estate Planning Attorney", "Estate Planning", "Estate-Planning Tools", "Long term care", "Macomb County Estate Planning Attorney", "Marc Wander", "Michael P. Witzke", "Michigan Estate Planning Attorney", "Michigan Estate Planning Lawyer Blog", "Michigan Estate Planning Lawyer", "Oakland County Estate Planning Attorney", "Oakland County Estate Planning Lawyer", "Wayne County Estate Planning Attorney", "Witzke Berry Carter & Wander" — Christopher J. Berry @ 9:14 pm
Estate planning often has a more dramatic effect on women due elongated life expectancy and the tendency to marry older spouses. As a result, they are three times more likely to be widowed at 65, than men. Estate planning is an imperative component in retirement planning, and with a greater probability of surviving their spouses, women often have the final word about how much wealth goes to family, charity or the taxman.
(Read more: Women and Estate Planning: Part 1)
5. Spouses Get Special Tax Breaks
Under the “unlimited marital deduction” assets inherited or received as gifts from a spouse are not taxed. Starting in 2011, portability allows a surviving spouse to add any unused estate tax exclusion of the recently deceased spouse to her own exclusion. A widow can pass on up to $10.24 million, untaxed, through either lifetime gifts or her will. If your spouse is not a U.S. citizen, the marital deduction is more limited and portability does not apply.
6. Tax Planning For Widows Is More Difficult
The primary goal, for most married couples, is to leave each other provided for financially. Upon death of the first spouse, tax saving strategies are more imperative considering the unlimited marital deduction no longer applies. However, there are a number of simple ways to save taxes while achieving other goals, like subsidizing family members who are less fortunate, educating children and grandchildren and preserving retirement assets.
(Read more: Estate Tax On the Rise, Don’t Panic, Plan)
7. Do Not Own Your Insurance
Because proceeds could be subject to estate tax, you will likely give away money to the government if you die owning a policy on your life. One way to avoid that outcome is to designate the family member who will receive the proceeds as the owner of the policy. Another is to establish an irrevocable life insurance trust. Traditionally, the ILIT buys the policy and, when you die, holds the proceeds for whomever you have named as beneficiaries.
8. Beneficiary Forms Are Key
Retirement accounts are distributed according to beneficiary designation forms filed with the bank or financial institution holding your account. You can readily name any beneficiaries you desire with an IRA, including friends, family members, a charity or a trust. For a 401(k) or other workforce plan, you must acquire or spouse’s written consent to leave it to anyone else. You must filed an amended form to change a beneficiary, if you get divorced for example.
(Read more: 8 Life Stages of Estate Planning: Part 1)
9. Cash Is King
Couples who commingle money must ensure there is sufficient funds to cover immediate expenses if one of them suddenly dies. Said funds can be held in each of your separate accounts or in a joint individual account right away.
Read more: http://www.forbes.com/pictures/efik45ehjjg/estate-planning-is-a-womens-issue-2/
Mr. Witzke practices in the areas of estate and gift tax planning, financial planning, retirement planning, LGBT civil rights, charitable giving, elder law, and small business planning. He focuses on helping clients grow, protect, and transfer wealth efficiently. Mr. Witzke is a past president and board member of the Financial Planning Association of Michigan, a member of the board of directors for Leadership Oakland, and a member of the planned giving advisory committees of Wayne State University and the Community House in Birmingham. Follow Mr. Witzke on Twitter @gr8estatelawyer.
