April is Financial Literacy Month: Estate Planning Advice from Deborah Fox

Emmy Pasternak, Community Outreach and Case Development Coordinator, LRIS

In March 2004 Senate Resolution 316 established April as “National Financial Literacy Month.” In a nod to April’s moniker, BASF member and LRIS Estate Planning attorney Deborah Fox answers questions and provides sage advice on estate planning and financial matters.

Emmy Pasternak (EP): Not only is April “Financial Literacy Month”, it is also tax time. When assisting clients with Estate Planning, what do you advise regarding tax implications for their heirs? Does it depend on how large the estate is?

Deborah Fox (DF): Except for the very wealthy, estate taxes are no longer the driving force behind estate planning. The Federal estate tax exemption rate is currently set at $5.34 million and indexed for inflation. This means in 2014 a married couple can pass on $10.68 million to their beneficiaries free from federal estate taxes. However, there is a smorgasbord of other taxes that can seriously affect more modest estates, especially income taxes and property taxes.

As part of an integrated estate plan, I review my clients’ current and projected assets, and provide them with options to minimize taxes. I also advise my clients that tax savings are secondary to other, more important considerations, like making sure their family and loves ones are protected.

Given the new tax laws affecting same-sex married couples, and the increased federal estate tax exemption, I advise all married couples to revisit their existing estate plans to ensure the plans continue to meet their needs.

EP: Why should a person have an estate plan? If they are of meager means, do they really need to make any sort of plan?

DF: Those with loved ones should have some sort of estate plan in place to minimize the chaos and misery faced by those left behind.

Those with minor children should execute a will naming appropriate guardians and consider obtaining term life insurance so that named guardians have funds to care for the children.

Planning for potential incapacity by naming a financial agent and a health care agent to manage finances and health care is vital. I bicycle to work every day and am acutely aware of the potential for injury and resulting incapacity. Without incapacity planning, my family might have to establish an expensive and intrusive court ordered conservatorship just to pay my bills and authorize medical treatment.

An estate plan does not necessarily mean an expensive bundle of attorney drafted legal documents. For those without real property or complicated assets, an integrated estate plan can be as simple as making sure the beneficiary designations on a life insurance policy and 401K plan are up to date, assets are appropriately titled, and a basic will and incapacity documents are in place.

An important consideration for many pet owners is ensuring their estate plan provides for the immediate care and placement of any surviving companion animals, ideally with an allocation of sufficient assets to pay for associated costs. This allocation of funds can be held in trust for the animal or distributed to the caregiver outright.

On March 31, 2011, President Barack Obama proclaimed, “I call upon all Americans to observe this month with programs and activities to improve their understanding of financial principles and practices.” Or, in the words of Leonard Nimoy as Spock, “Live long and prosper” – just do so with awareness and a good estate planning attorney at your side.