Last Will and Testament: Knowing When You Need an Estate Plan By Lorabella At Isnare.com Ezine Articles

In some cases, the need for an estate plan does not exist such as when little or no property or assets of any kind are owned. However, as the number of assets increase or the type of property owned becomes more complex, the need for an estate plan increases. The presence of certain types of assets clearly indicates the call to develop such a plan in order to ensure the rights of the beneficiaries in the manner that the testator wishes.

Possession of One or More Businesses

If one or more businesses are owned, an estate plan could be handy to have. It could be used to determine who would run the business in your absence whether you die or simply become incapacitated due to mental illness. This becomes even more of an intricate problem if you have more than one family member or smaller partner all of whom might be qualified to take over essential aspects of the company.

Possession of One or More IRAs or 401k Plans

The possession of one or more IRAs or 401k plans is a clear indication that your estate could benefit from the creation of an estate plan. Although the assets in these types of financial plans are designed to provide a comfortable lifestyle for you once you retire, they do end up in the hands of beneficiaries often enough. Certain estate tax implications exist for both IRAs or 401k plans when the assets contained within them are transferred from the original owner to one or more beneficiaries. An estate plan can be used to ensure that these assets go to the proper individuals while taking into consideration the tax implications as well.

The Possession of a Large Life Insurance Policy

Certain implications exist for life insurance policies that are often misunderstood. It is true that the proceeds from life insurance policies are income tax free when they transfer to the beneficiary. However, if the policy was owned in the name of the insured or deceased individual at the time that he dies, then the proceeds fall subject to estate taxes. An estate plan can be used to help minimize the impact of these taxes as well as to set up plans for the best way for the proceeds to be used in regard to the estate.

The Existence of a State Estate Tax

Since the current limit for the federal estate tax is 3.5 million dollars of assets, this means that quite a few estates will not be required to pay any federal taxes since they will be under this cap. However, the existence of a state estate tax tells a completely different story that indicates that an estate plan could prove beneficial. This type of plan can be designed to minimize both federal and state estate taxes.

Not all states have a provision for an estate tax. In fact, only the following states currently have an estate tax on their books: Minnesota, Massachusetts, Maryland, Washington, Rhode Island, Oregon, Oklahoma, Ohio, Vermont, Tennessee, North Carolina, New York, New Jersey, Maine, Kansas, Illinois, Delaware, and Connecticut.

The Impact of Inherited Assets on Your Estate

While you are alive, you might inherit some assets that will affect your own estate. An estate plan can be used to help you take this into consideration so that you can minimize the effect that it has. Certain circumstances might make this even more important such as an imminent divorce, an overly large estate, or an overly large inheritance.

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