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9 Estate planning questions to ask before year-end

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Remember the fiscal cliff? That was the potential nightmare facing the country almost a full year ago. With the American Taxpayer Relief Act ("ATRA") of 2012, passed by Congress on January 1, 2013, we were saved from the cliff—at least for a little while.

The ATRA made changes to estate and gift tax that may have an effect on your estate plan. Chat with your spouse or partner, review your existing estate plan (or schedule a meeting with an attorney if you don’t have an estate plan), and consider the following 10 estate planning questions to ask before it rings midnight on December 31st:

1. Should your estate plan be changed to reflect any new laws, new assets, or changes in your life?

I know two things for sure—the law is going to change and your life is going to change. Contrary to popular opinion, an estate plan is not a once-in-a-lifetime endeavor. Your estate plan needs to fit your family and circumstances to play out how you intend, and an outdated estate plan potentially could be worse for your loved ones than no plan at all.

2. Are your assets being tracked so that if anything happens to you, your family knows exactly how to access everything you own right now?

Every year, each state benefits from a "giant 'lost and found'" of unclaimed assets that "escheat" to your state government. "Escheat" means an asset goes unclaimed for a statutory period of time, after which the financial institution or custodian of the asset turns the property over to the state. You can google and read about a number of tragic situations where families didn’t know what a deceased person left and a good chunk of the estate simply disappeared. This is why it’s important to leave your family a detailed list of what you own and where it is located.

3. If you have a family LLC or limited partnership, has it been properly maintained to comply with the state’s laws?

Simply creating an LLC online or calling your company a "partnership" isn’t enough. From a liability perspective, a plaintiff’s attorney is thrilled when a business can produce no business records other than the initial Secretary of State document forming the company—this means the business hasn’t been properly run and the plaintiff’s attorney can likely access the business owners’ personal assets to satisfy a claim. Keeping your business

4. If you have made gifts to family or friends, have you exceeded your exemption limit for the year?

In 2013, the maximum amount one person may give to another during the year without having to file a gift tax return is $14,000. For example, a parent can give a child $14,000 without needing to file a return, and a married couple can give a child $28,000 combined without needing to file a return. Once a gift from one individual to another exceeds $14,000, the individual giving the gift has a legal obligation to file a gift tax return.

5. Are you maximizing opportunities for income tax deductions in 2013?

Keeping good accounting records during the year will help you spot quickly how much you have available in income tax deductions and business deductions. Check with your CPA or a trusted advisor to make sure you’re taking advantage of all deduction opportunities to help minimize the tax burden this year.

6. Are the people you have designated as guardian, executor, trustee or beneficiaries still the right ones?

Reevaluate your preferences regarding who would step into trusted roles under your estate plan. If your preferences have changed, or there has been a falling out with a friend or relative, you may need to update your plan accordingly.

7. Are you employing the best strategies for year-end charitable gifting?

Charitable giving has a double benefit—you have the joy of giving, and you have the possibility of a tax deduction. If you are inching toward your maximum deductible charitable giving or don’t know how much of that $150 donation to your favorite charity in exchange for a fundraiser dinner is deductible, seek counsel to ensure you’re deducting the right amount.

8. If you donate cash to a charity from an IRA, are those being made properly?

Qualified retirement accounts have what can be tricky distribution requirements. It’s best to navigate these questions with a trusted financial advisor to ensure you’re making proper distributions to charities and to yourself—whether as the initial account owner or as the beneficiary of an inherited IRA.

9. Is there an opportunity to use a trust to protect assets?

Find an attorney who has the heart of a teacher. When working with an estate planner to design your estate plan, it’s important that you have a complete understanding of what probate is and how you can avoid it if that’s your desire. Many people (and attorneys) take the approach that "probate is easy" or "a will is enough" without informing the clients exactly what the probate process will look like for their loved ones after their gone. Only understanding the probate process will guide you to deciding whether a trust (which avoids probate if done correctly) is right for your family. And here’s a common myth: "a will avoids probate." Absolutely not true!

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Note from the author: Year-end questions are important for all estate plans. If you want to have an estate planning "check in" or even talk about it for the first time, check out your options with an estate planning attorney. For the first two people who read and mention this article, we've reserved space on our calendars this month for a complimentary Family Wealth Planning Session (a $750 value) to spend up to two full hours gaining an understanding of the estate planning process. Call 720-266-8190 today and mention this article.

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