What Can an Estate Plan Do for You?
Estate planning is great for people who suddenly receive a large amount of money or property because it makes them think about the future. In a few years or a few decades, you will need retirement savings to pay your expenses. Also, you may want to leave some wealth to your children, spouse, or relatives.
Through estate planning, you can open retirement accounts and leave them to appropriate beneficiaries, choose life insurance if you would like, sign a will, make charitable donations, and prepare to pay for children’s educational expenses. Rather than spending most of your windfall on material possessions, you can build a foundation for your and your family’s future.
Further, the windfall can help you pay for quality legal help to put your estate plan into place. You need documents that meet legal requirements in your location and take into account tax issues. Using forms printed from the Internet or scribbling down a handwritten will may provide less than secure legal protection.
Are There Any Pitfalls to Receiving a Windfall?
Having a lot of money all at once can lead to overspending, of course. But you also may receive unwelcome news at tax time. Some types of windfalls require large tax payments, such as gambling winnings. Others, like inheritances, do not.
California has no inheritance tax, meaning you do not pay taxes at the time that you inherit money from someone else. That person’s estate is responsible for the tax liability. Of course, if the windfall money remains in your estate until you pass away, your estate will have to pay taxes.
If you are a U.S. citizen, your estate will owe taxes if its value exceeds $11.18 million. This may seem high, but consider that your estate may include everything from cash in bank accounts to real estate to jewelry. If you are not a U.S. citizen and not a permanent resident, your estate will owe taxes if its value exceeds only $60,000. Obviously, your estate is at greater risk of substantial reduction in value due to taxes. This means that your relative could inherit a lot less if you do no estate planning.
Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.