Financial management

5 things you should consider when estate planning

Educate our UHWN group on the details of estate planning and highlighting key pieces they may have overlooked.
8 minute read
March 22, 2022
Financial management
Estate planning
Charitable giving

The future is constantly changing, and it’s likely that your estate plan will need to change too.

—Kevin Wick, Senior Estate and Trust Specialist

Even when you already have an estate plan in place, it’s crucial to monitor all aspects of the plan as you get older and your situation evolves. And while you can keep an eye on the plan yourself, partnering with our team of wealth management experts can help you avoid an oversight that could put your family's future at risk.

1. Take inventory

Take stock of your assets – investments, properties, and valuables – and determine how much they’re worth and ensure they’re titled accurately. Your assets’ value can change over time, so it’s critical that you continue to analyze them throughout your lifetime. In addition, the way your assets are titled affects where they’re going. For example, if they remain in your name when you die, they’ll go through probate. If you have investments in a joint account, they belong to the other joint owner; if they’re in a trust, they’ll skip probate and go to your designated beneficiaries. Make sure to revisit your assets to ensure they’re titled accurately.


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2. Establish a trust

Trusts are another component of estate planning that should be revisited regularly. Let’s say you set up a trust 10 years ago and acquired a rental property 5 years later. If you want the property titled under your trust, you'll need to make this update once the property is in your name.

Additionally, it’s important to understand what your trust does and doesn’t do. For instance, a revocable trust can be updated throughout your life: You can add or remove assets, change instructions, or terminate the trust. Income earned is distributed to the trustor (you), and your property is transferred to your beneficiaries after your death. You aren’t required to set up a trust, but it’s an efficient and structured way to avoid probate.

3. Pick the right people

When it comes to choosing who will carry out your estate, it’s imperative that you appoint those you trust. If you have assets that will go through probate, you’ll need to an executor to implement the terms of your will after you pass. A power of attorney (POA) gives a person of your choosing the power to act on your behalf and make decisions about your property, finances, or medical care (You should have a separate POA document for each of these entities). If you have a trust, you’ll assign a trustee to hold the legal title for the benefit of the trust’s beneficiaries. The trustee is responsible for the assets and property titled in the trust and for making sure your wishes are carried out correctly.

Trusts—and the assets held in them—can be complex. If you don't feel comfortable with any individual handling your trust, you can appoint a corporate trustee. Learn more about Vanguard’s trust services.

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4. Give a gift (or 2)

Managing gift exemptions can feel tricky when the amount is constantly changing. The annual exclusion gift amount increased from $15,000 in 2021 to $16,000 in 2022, meaning that you can give any number of people $16,000 tax-free. But if your gift exceeds this amount (for example, you give your oldest daughter $20,000), the remaining balance ($4,000) could be taxed. However, you and your spouse can gift anyone a total of $32,000 ($16,000 from each of you) and neither you nor the recipient will be taxed.

The lifetime gift tax exemption also increased to $12.06 million this year. This exemption allows you to give a much larger gift to someone without paying the gift tax. Let’s say you gift someone $100,000 in 2022: $16,000 will count toward the annual exclusion gift amount. The remaining $84,000 will trigger the gift tax, but you can file a gift tax return (IRS Form 709) and allocate this amount to your lifetime estate and gift tax exemption balance so that you won’t have to pay taxes.

5. Understand UTMAs/UGMAs

A Uniform Transfer to Minors Act (UTMA)/Uniform Gift to Minors Act (UGMA) account allows you to save money for a minor, and can be a way for you to gift funds annually. But before you open an UTMA/UGMA account, think long-term: The minor named on the account will have irrevocable access starting at age 18 through 21, depending on the state where the account is held. You won’t be able to dictate what they do with the funds or keep them from accessing the funds once they reach the age of majority. If you want to save for your child or another minor and still be able to decide how and when the assets are distributed, consider establishing a trust.

Estate planning should be an ongoing process, but you don’t have to go through it alone. Together, we can take your estate plan further for you and your loved ones.

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