Berman & Asbel, LLP

Fundamentals of estate planning

As the year draws to a close, tax and estate planning has been on the minds of many people in Pennsylvania, and it can be a good time to revisit the basic financial and estate planning strategies and tools. Updating wills and reviewing beneficiaries listed on insurance policies, retirement accounts, and pensions ensures that property is inherited by the desired individuals.

Designating a power of attorney for financial management and one for healthcare decisions is prudent for the possibility of incapacitation. In that case, someone will have to make medical and financial decisions, and having a trusted friend or relative already selected will make a difficult situation much easier. A person should be selected who will follow the directives specified beforehand in documents easily available to them. Guardians for minor dependents should also be selected.

Formation of trusts can preserve wealth as well. There are many different types of trusts and tax-reduction strategies that can be employed. Although the estate tax exclusion is $5.34 million for 2014, estates that are worth more than that amount can still take advantage of certain types of structures. Grantor trusts may reduce the estate tax bill as taxes are paid on gains by the grantor. Transferring assets beforehand may reduce estate taxes. Financial strategies to offset stock gains by using a mixture of bond purchases and sales may also help reduce the capital gains burden.

Estate planning is an important part of financial planning. How wealth is invested, valued, transferred and held may have a tremendous impact on taxation. Keeping beneficiaries and guardianships current may help prevent unpleasant surprises for survivors.

Source: The Huffington Post, "Planning Now: Back to the Basics", Jordan Waxman, December 18, 2013

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