Think Your Estate Plan is All About Taxes? Think Again.

Many people equate estate planning with tax avoidance. They are wrong.

Tax planning is an important part of estate planning. This is especially true when you live in the Northeast, where the threshold for triggering estate tax on the state level is among the lowest in the nation ($1,000,000 in Massachusetts and $1,648,611 in Rhode Island). And your taxable estate includes almost everything you own at death (including your retirement accounts and your home)[i].

However, estate planning is about much more than avoiding taxes. The primary function of your plan is to ensure that your wishes for your assets are carried out when you can no longer do it yourself.

No matter how much money you have or how “simple” your estate or your tax situation, everyone should have accurate and up-to-date versions of these 5 estate planning documents:

Most of these documents have zero or minimal tax impact, but each document offers non-tax benefits, which may be especially important to you. For example, you:

• Choose who carries out your wishes. A revocable trust, pour-over will, healthcare power of attorney, and durable power of attorney allow you to choose someone to carry out your wishes and your own personal representative after death or in the event of incapacity (e.g. accident, illness, Alzheimer’s, or dementia).

• Keep your finances private. Each of the documents listed enable your heirs to avoid the publicity, inefficiency, and cost of probate or a court proceeding.

• Ensure assets go where you intend. With a revocable trust, pour-over will, and beneficiary designation forms, your estate avoids statutory and contractual default rules (which could have your assets going to a relative you have never met – or wish you hadn’t – or to someone you no longer want to benefit, like an ex-spouse listed on an old beneficiary designation).

• Provide asset protection. After your passing, a revocable trust can ensure your heirs won’t lose their inheritance to third parties as a result of debt, money owed to creditors, a lawsuit, substance use disorder, or divorce to an ex-spouse. We can help you determine whether your trust provides future creditor protection.

Many people don’t want to think about estate planning. However, keeping your plan current gives you the peace of mind that you’ll leave the legacy you envision for your loved ones.

At Washington Trust Wealth Management, we review these documents on a regular basis as part of the financial planning process. If you want to make sure your paperwork is accurate, reach out to your wealth advisor to schedule a review – and take control of your legacy.

Be sure to read the companion article, Summer 2022 Economic and Financial Market Outlook.