The good news is that, if you are reading this, it’s probably because you care enough about your family to be thinking about preparing a will. The reason why we make a will is to protect and show care for our family members after we are gone. However, there are some things you need to know so your will doesn’t mistakenly create as many problems as it solves. Before I go any further, you need to know that I am not a lawyer so I am offering practical rather than legal advice to help you to avoid costly financial and even family problems that could arise after your death. I just spent a small fortune getting accounting advice in connection with recent changes to my will and I learned a few very important tips.
The first thing I learned is a bit of a shocker. Thanks to my accountant, I now know that it is possible that an estate – or a beneficiary of a bequest – could actually have to pay more in taxes on items in the estate than the items are actually worth. The IRS requires that an appraisal be made of the assets in an estate to determine what amount is subject to federal taxes (the states have their hands in your coffin as well though their tax collection rules are frequently different than the IRS). At the time this is being written, the IRS tax rate is 45% though President Obama has recently announced plans to increase the tax rate on estates as well as make much more of the estate subject to taxes. The problem is that things like cars, boats, furniture, art work, pictures, etc. are appraised at their highest retail value and that amount will be taxed at the 45% (and soon to be higher) rate. Unfortunately, it is very possible that you may get less than 45% of the appraised value if you sold some of these items so taxes could be more than the cash you receive. Also, did you know that the maker of a will decides whether those taxes are paid by their estate or whether the beneficiary has to pay the taxes themselves?
One solution would be to leave these types of items to a non-profit organization which should result in a tax deduction and a reduction in estate taxes based on its appraised value. You might also consider leaving your furniture and household items to a non-profit group even if taxes aren’t an issue and stipulate that they are responsible for boxing up and transporting all of those items themselves to save your heirs a great deal of work. .
Here are some other helpful hints:
- Unless you have a very simple estate, paying an accountant for an hour or two of their time to help you to understand current laws as well as various financial options before you make a will is money well spent;
- Because things in your life change over time as well as estate laws and taxes change, you should review your will from time to time and make revisions as needed;
- How many times have you seen in the paper or on Antiques Road Show or some other tv show that someone bought something worth thousands of dollars – or even more – at a garage sale or flea market for just a few dollars? It happens all too often because we don’t make a list of those items we possess that are especially valuable. For example, I love books and have over-filled bookcases scattered throughout my house. None of these books are valuable except my collection of Sue Grafton books, all of which are first editions, many are signed by the author, and four or five of the early works are worth thousands of dollars. However, unless I document the value of these books as part of my estate records, my Sue Grafton books would probably end up at a garage sale with all of my other books being sold for fifty cents apiece.
- There’s often a lot of hard feelings (or worse) over who gets what possessions after someone dies because several people will want the same items. An easy way to solve this problem is to add a provision to your will that 1) lists everyone you want to share in taking your possessions; 2) instruct those people to put numbers in a hat equal to the number of the people on your list and ask each person to reach into the hat without looking and pick a number; then 3) each person takes their turn in the order of the number they drew and picks one possession until everyone has made one selection and so on and so on until the possessions have all been taken.
- If you are ill and know that death is sooner than later, you might consider giving away things like jewelry, valuable art work, furniture, books, etc. to those you want to have those items BEFORE you die to simplify your estate and also be able to enjoy the appreciation of the beneficiaries while you are still alive.
These are my best helpful hints. Please write in if you have some of your own “do’s” or “don’t do’s,” especially from your own experiences, and share them with the rest of us.
0 comments:
Post a Comment