Under current federal tax laws, a married couple can generally exempt up to $10 million in federal estate taxes. This effectively exempts the vast majority of Americans from having to engage in estate tax planning with respect to federal estate taxes. The change may have influenced some people in Texas and elsewhere to think that estate planning itself was no longer necessary.
However, that is far from the truth. There are still state taxes imposed upon one's death in many states. Additionally, plans for the future cannot rely on the current federal estate tax rates -- lower exemptions appear to be slated for future years. Furthermore, income tax planning, asset preservation strategies and gifting to beneficiaries during life must be considered in appropriate cases.
Moreover, certain legal instruments and strategies are universally required regardless of financial wealth. Every person will likely need to consider a last will and testament, living will, health care proxy and durable power of attorney. They may also want to include life insurance, long-term care insurance and a revocable living trust. A person's particular financial situation will dictate the necessity or feasibility of some of these items.
The will, durable power of attorney, and healthcare directives are the bare minimum necessities for every person. The will assures distribution of assets at death according to the testator's wishes. It sets up testamentary trusts to direct the distribution of funds to any minors or beneficiaries that may require special financial protection.
The will also allows for instructions on what to do about certain assets. The power of attorney allows a person's appointee to sign checks, pay bills, and generally handle one's affairs in the event of incapacitation. Health care directives tell medical providers what to do regarding life-support devices in a last illness.
The living will allows for a trusted person to make certain medical decisions in the maker's behalf. Whether a resident of Texas or another state, adults who have not yet set up an estate plan may be exposing their legal rights to various unwanted consequences or disadvantages by not preparing an estate plan. Such individuals will be well-served by consulting with an estate planning attorney to find out what needs to be done according to one's particular circumstances and preferences.
Source: insurancenewsnet.com, "Back to the Basics of Estate Planning: Reexamining Estate Planning Needs, Regardless of Wealth", Victor Ngai, March 26, 2015