Page 14 - BusinessWest 2023 Senior Planning Guide

your partner may get nothing. If you share certain property, such as a house or car, you may consider owning the property as joint tenants with rights of survivorship. That way, when one of you dies, the jointly held property will pass to the surviving partner automatically.
Married Couples
For many years, married couples had to do careful estate planning, such as the creation of
a credit shelter trust, in order to take advantage
of their combined federal estate-tax exclusions.
For decedents dying in 2011 and later years, the executor of a deceased spouse’s estate can transfer any unused estate-tax exclusion amount to the surviving spouse without such planning.
You may be inclined to rely on these portability rules for estate-tax avoidance, using outright bequests to your spouse instead of traditional trust planning. However, portability should not be relied upon solely for utilization of the first to die’s estate- tax exclusion, and a credit-shelter trust created at the first spouse’s death may still be advantageous for several reasons:
• Portability may be lost if the surviving spouse remarries and is later widowed again;
• The trust can protect any appreciation of assets from estate tax at the second spouse’s death;
• The trust can provide protection of assets from the reach of the surviving spouse’s creditors; and
• Portability does not apply to the generation- skipping transfer (GST) tax, so the trust may be needed to fully leverage the GST exemptions of both spouses.
Married couples where one spouse is not a U.S. citizen have special planning concerns. The marital deduction is not allowed if the recipient spouse is a
non-citizen spouse (but a $164,000 annual exclusion for 2022 is allowed). If certain requirements are met, however, a transfer to a qualified domestic trust will qualify for the marital deduction.
Married with Children
If you’re married and have children, you and your spouse should each have your own will. For you, wills are vital because you can name a guardian
for your minor children in case both of you die simultaneously. If you fail to name a guardian in your will, a court may appoint someone you might not have chosen. Furthermore, without a will, some states dictate that, at your death, some of your property goes to your children and not to
your spouse. If minor children inherit directly, the surviving parent will need court permission to manage the money for them.
You may also want to consult an attorney about establishing a trust to manage your children’s assets in the event that both you and your spouse die at the same time.
You may also need life insurance. Your surviving
spouse may not be able to support the family on his or her own and may need to replace your earnings to maintain the family.
Comfortable and Looking
Forward to Retirement
If you’re in your 30s, you may be feeling comfortable. You’ve accumulated some wealth, and you’re thinking about retirement. Here’s where estate planning overlaps with retirement planning. It’s just as important to plan to care for yourself during your retirement as it is to plan to provide for your beneficiaries after your death.
You should keep in mind that, even though Social Security may be around when you retire, those benefits alone may not provide enough income for your retirement years. Consider saving some of your accumulated wealth using other retirement and deferred vehicles, such as an individual retirement account.
Wealthy and Worried
Depending on the size of your estate, you may need to be concerned about estate taxes. For 2022, $12,060,000 is effectively excluded from the federal gift and estate tax. Estates over that amount may be subject to the tax at a top rate of 40%.
Similarly, there is another tax, called the generation-skipping transfer (GST) tax, that
is imposed on transfers of wealth made to grandchildren (and lower generations). For 2022, the GST tax exemption is also $12,060,000, and the top
“You should keep in mind that, even though Social Security may be around when you retire, those benefits alone may not provide enough income for your retirement years.”
Estate
Continued on page 40
Here’s To
75 Years
Of Making
It Count.
MBK is proud to celebrate 75 years of partnering with the local business community. Here’s to 75 more!
413-536-8510 | mbkcpa.com
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