Gearing Up for Estate Planning

With the new year upon us and tax season soon to follow, families are sure to have financial planning matters on their mind. Reviewing the previous year’s financial data when preparing taxes often spurs families to think about changes they may want to make in both the near and long term. While some may feel that adding a new task while in the process of accumulating tax information is undesirable, it may actually be an ideal time to review one’s estate plan and make any necessary adjustments.

Organize assets. During tax season, a family’s assets and liabilities are often laid bare, providing an excellent opportunity to create a schedule of assets — whether they are financial, real estate, or collectibles. This is a crucial first step in deciding what assets the owner may want to bequeath to heirs, which to donate to charity, and which to consider selling. After all, how can one effectively draw up an estate plan without knowing what is in their estate?

Designate beneficiaries and place assets in trusts. Passing of financial or other assets to future generations — such as those held in retirement accounts — can be as simple as designating a beneficiary on a form. Other assets, such as real estate, collectibles or other illiquid investments, may be more complex and may have tax consequences for the estate and the beneficiary. For this reason, families will want to work with tax and estate planning advisors to determine what assets may be passed through a will, and which assets may make more sense to place in trust. Determining what type of trust becomes another question to be answered with the assistance of professionals.

Name Powers of Attorney. Another essential part of estate planning deals with designating powers of attorney to act when the owner of assets is no longer able to do so. A durable power of attorney will be able to conduct financial transactions on behalf of another person. This person is often a spouse or family member, yet there may be times when it is more appropriate to designate an outside advisor to fulfill the role. It is also important to set up a healthcare proxy for health-related decisions on behalf of an individual.

Depending on the size of an estate as well as many other variables, enacting these estate planning measures can be a time-consuming process — one that may not be finalized in one calendar year. Once a plan is updated, families are encouraged to complete a cursory review annually to make sure the plan still makes sense for the family.  This is especially true when there has been material changes in their circumstances.

For more information or to discuss estate planning in greater detail, contact your Anchin Relationship Partner or Tamir Dardashtian, a Partner in Anchin Private Client, at 212.840.3456 or [email protected].