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Illuminated Advisors


Three Considerations When Planning Your Estate

Keep these aspects of estate planning in mind to better prepare for the future.

Estate planning is all about looking toward the future and preparing a strategy that accomplishes your goals and meets your loved ones’ needs. Planning your estate often includes, but is not limited to, a will and/or revocable living trust and an advanced healthcare directive. Below we’ll discuss three additional aspects of estate planning that you should thoughtfully consider in order to improve your quality of life while you’re still here. Thinking about these things now can save you and your beneficiaries time, frustration, and grief in the future.

Contemplate Your Own Mortality

This is a difficult step for many people, for obvious reasons. However, focusing on the reality that one day you will be gone can be an important motivating factor in organizing your estate. Being mindful of the time you have left can help you focus on the best decisions for planning your estate. Even though none of us knows how many years we have on Earth, these statistics on average life expectancy can be useful when it comes to estate planning. Reminding yourself of your mortality can help you to stop procrastinating – in business, in finance, and in life – and take steps forward with making plans and devising strategies to accomplish your goals.

Think Beyond Your Current Net Worth

We are often focused on current assets and what the past several years can tell us about our wealth. However, you should also calculate and consider your projected lifetime net worth. Using your lifetime net worth and projected estate worth, you can begin to determine how the lifetime gift exemption and estate taxes will affect your estate and beneficiaries.

When your estate transfers to your beneficiaries, the lifetime gift exemption rate is removed and whatever is above that amount is highly taxed. As of 2020, this estate tax – or death tax, as it is commonly known – had reached 40% of the total estate after the exemption rate. The recent Tax Cut and Jobs Act will expire in 2025, and many expect the current gift exemption amount to drop and the tax to increase.

A decreasing exemption and an increasing tax rate can set up a situation where your beneficiaries will be saddled with a large tax bill. In this instance, they may have to sell off some of your assets to pay the tax bill. If a family business or vacation home is what you are passing on, it may become necessary to sell the business or property in order to pay that estate tax. Something to keep in mind when planning your estate is that this estate tax is an additional tax on money that you’ve already paid taxes on.

To help protect against this tax taking away important assets, you can make sure there are liquid assets on hand. One of the best ways to create liquid assets for your beneficiaries is a life insurance policy. At the heart of things, the reason you want to leave money to your beneficiaries is so they will be taken care of when you’re gone. Life insurance is a way to invest in their future and is a quick way for them to get financial relief paying for bills associated with death, probate, and taxes. If you set the policy up as a revocable trust it won’t be counted toward the estate gift exemption amount.

Make Use of Your Money in the Present

Another crucial, yet often overlooked, part of an estate planning strategy is to have a plan in place for your retirement. You will want to identify around what age you will be retiring and have a projected monthly expense amount. If you find your retirement amount is well over your projected monthly spending, go ahead and begin using the extra capital now while you can. There is no reason to hold on to money for your estate if it increases the value much higher than the limit for estate tax exemption.

So, what can you do to lower that tax before you die and also provide for your beneficiaries? Once you have hit your retirement and savings contribution goals for the year, consider gifting or donating your excess funds in order to start benefiting your beneficiaries now. The current maximum amount you can gift, tax-free, per year is $15,000. You can make gifts to your loved ones, or you can consider giving the extra capital to one or more of your favorite charities. Planning your estate is also about making good decisions in the present, so keep in mind that you may be able to watch your money make a meaningful difference now, while you’re still alive to see it.

Final Thoughts on Estate Planning Considerations

Planning your estate is a necessity if you want to accomplish your goals, ensure your wishes are met, and provide for your loved ones. By taking into consideration the three planning aspects mentioned above, you can gain additional motivation and control when it comes to your assets. When you take the time to contemplate your own morality, think beyond your current net worth, and consider how to make meaningful use of your money today, you’ll strengthen your estate plan and gain peace of mind in the process.


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The best time to plan your estate is NOW. These three tips can help maximize your financial plan.

#PersonalFinance #EstatePlanning #Financial Planning #Retirement #Beneficiaries #LowerTaxes

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