How To Take Advantage Of Tax Season To Tackle Estate Planning

By Renee Fry, Founder and CEO, at Gentreo

As Ben Franklin noted, there are two certainties in life—death and taxes. Tax season was just upon us here in the U.S., which many of us are relieved to have just checked off. Preparing for death and emergencies when we need others to make decisions for us is something most of us have not done. A 2021 Gallup poll showed less than 46% of Americans surveyed have a will, a staggering figure given the consequences of not doing estate planning. Whether it is paying thousands of dollars in legal fees to have judges make decisions for your loved ones or witnessing families break up over resulting legal battles, the consequences of not doing estate planning are enormous and costly.

According to experts, without estate planning documents, an estate loses anywhere from 3% to 8% of its value to legal costs and fees. Outdated documents can also prove costly as they require court attention, which is why experts suggest regularly updating your estate plan.

Read on to find out why you should be thinking about estate planning during tax season.

What does estate planning have to do with tax season?

When taking stock of yearly earnings and asset changes, it is essential to consider whether your estate plan reflects these current circumstances and your wishes. For good or ill, financial circumstances and relationships are ever-changing and your estate plan needs to be continually updated to make sure it reflects these changes.

Did you get that promotion or lottery windfall you’d always dreamed about? Did you finally give the go-ahead for that extension on your home? Our assets come in many different forms, so being mindful of any changes that may have occurred during the tax year is essential. If your income has significantly risen or fallen, or you’ve bought or sold high-value property such as homes and vehicles, it may be necessary to revisit your estate plan.

Also, it’s important not to overlook any new financial endeavors. User-friendly apps and platforms have turned many into hobbyist investors, which may have a bearing on our assets. Investments can fluctuate in value throughout the year, so estate plans should be updated to reflect the state of any investments.

When branching off into the realm of cryptocurrencies, bear in mind that the only gateway to your portfolio’s funds is a private key. Stories abound of crypto assets being forever lost in cyberspace after the loss of the private key. Estate plans should contain provisions for accessing crypto portfolios, safeguarding any hard-fought returns.

When drawing up an estate plan, allocating assets is not an easy task. Significant changes in the value of assets could undermine initial tough choices. For example, if the value of your house has soared or you’ve dipped into your savings, this may affect how much each beneficiary receives. If your estate plan includes specific gifts (like giving $10,000 to a friend or your home to a specific child), these gifts are allocated first before your heirs divide your remaining assets in accordance with your will.

If your financial situation significantly changed, it’s critical that you review and update your estate plan to make sure your assets are divided as you first intended.

What if I don’t have an estate plan?

A common misconception is that estate planning is expensive and time-consuming. However, just like tax planning, online estate planning platforms have taken over much of the legwork and brought costs down. Many of these platforms have developed user-friendly online dashboards accessible to everyone and offer coaches to walk you through the process.

Estate planning is a comprehensive plan that goes beyond just inheritance, starting when you’re alive. I believe everyone over the age of 18 should have the legal tools to protect themselves in case of injury or incapacitation. As part of estate planning, you can put in place Powers of Attorney to ensure that the person you trust the most takes on responsibility for your health and/or finances should the worst happen, quelling the risk of family strife.

Tax season presents an opportunity to check two boxes at once. Along with filing taxes, be sure to create or update your estate plan and be in control of your assets and who will make financial, medical and legal decisions for you when you cannot. Like good tax preparation, estate planning can help reduce costs down the road and lessen the burden on family members, helping you to preserve your hard-earned estate.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.


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