Review Your Will and Beneficiary Designations

Do you have any of the following?
-Individual Retirement Accounts (IRAs)
-Life Insurance Policies
-Retirement Plans through your employment (401k)

It is important that you periodically review your Will and Beneficiary Designations on other assets such as IRAs, Life Insurance Policies, and 401k plans to make sure these documents do not need to be changed due to changes in your life circumstances or changes in the laws.

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Act) greatly reduces exposure to the federal estate tax for most individuals and families. For 2011 and 2012, the federal estate tax exemption is increased to $5 million and also raises the federal gift tax exemption to $5 million. Another significant change is that the new law includes an estate tax exemption between spouses. Any of the $5 million exemption amount not used by the first spouse to die can be used by the surviving spouse’s estate in addition to their own $5 million exemption.

Even with these higher exemptions, the new law does not remove the need for current estate planning. Many wills are drafted with formulas to comply with whatever estate tax exemptions are in place at the time of one’s death. These formula provisions can produce significantly different results if the exemption is $5 million, $3.5 million or $1 million.

The substantial changes to the gift tax also permit significant planning opportunities to transfer your wealth to your children or grandchildren while you are still alive. You can now transfer gift tax-free during your lifetime the same amount that you can transfer estate tax-free at your death.

Beginning in 2013, the estate and gift tax exemptions are scheduled to go back to the $1 million per taxpayer amount and a 55% maximum estate tax amount. Although we do not know what will happen with the estate laws two years from now, the current laws offer a variety of estate planning opportunities. At a minimum, you should review your will and other estate documents and be comfortable that they are drafted to meet your current circumstances.

Beneficiary Designations
Not all of your assets pass under your will. IRAs, Life Insurance Policies, and Retirement Plans allow the owner to designate the beneficiary through a beneficiary designation form. Some investment accounts and savings accounts also have beneficiary designations if they are transfer-on-death or payable-on-death accounts. These assets will go to the beneficiary you name and do not pass under your will.

Whenever there is a significant change in the law or a major event in your life – divorce, marriage, birth, adoption-you should review your designated beneficiary forms to make sure that the people you have named are still the ones you would like to inherit those assets.

Supinka & Supinka, PC would be happy to assist you with your estate plan. We can review your existing estate documents, assist you in developing a gifting plan, and discuss wealth transfer techniques. Feel free to contact us with any questions.

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