Death of a Taxpayer

The well-known phrase about nothing being certain other than death and taxes is more real than we might want to admit. The taxes that can come into play when someone passes away can be anticipated and managed so the impact on the family is reduced. Or, unfortunately, by choosing not to plan, they can be an added point of major stress at an already very difficult time.

There are some key points to act on now, and regularly review, in order to reduce any anxiety or confusion for your family and those close to you.

Plan.

The first step is to create a plan. That certainly involves having a current will. Be sure the will is up-to-date and accurate. It will provide great comfort that choices and decisions have been made with thought and clarity, free from the distractions or heartache surrounding the passing of a loved one.

Align.

While a will is a critical part of the planning process, there is much more to understand. For instance, did you know that if your will directs everything to your spouse, but you have an IRA directed to someone else, the will is overruled by the other designation? So, it is important to take the time to consider each of the choices and documents that address your estate and make sure they are aligned, or, as we might say in Music City, harmonized.

Review.

Having the right documents and reviewing them with your family or others close to you is important. And, with the complexity of legal and tax issues, they should also be reviewed with your legal counsel and accountant – both. They are trained to know what issues could arise from how the documents are created, and the related tax implications. And, they may be able to suggest choices that allow more of your estate to be protected so it can be passed on to those you want to have it – and when you want it to be received.

It is best to review the documents annually. Life happens and creates changes. If those changes impact your will or other related documents, or even those involved as beneficiaries, it is best to update the documents now, rather than letting difficult issues arise later.

Talk.

Every family is different. Some are able to have open, frank conversations about finances and other sensitive topics. Others struggle with those situations. But, it is best if you can talk openly with those who are affected by your will and other legal documents. That includes appointing an executor, which is a role that involves much more than many people assume. There are personal legal liabilities that come into play, along with some challenging family relationships to navigate. Some families are fine with a family member being named executor. Others find it better to use a third-party due to sensitive relationships. Whichever you choose, it is best to make that choice now.

These thoughts are really just the beginning. Take the time to prepare now, so you and your family are protected from burdensome taxes and confusion at a time of grieving, when they should be free to focus caring for one another. If you would like to schedule a confidential conversation about your situation, please contact us. We will be glad to help.