Organizing for Tax (and Estate Planning) Season

Filed under Estate Planning, Estate Planning Blog, Taxes | By

taxes 91024It’s the start of a new year, which means tax season—and this year’s April 17th IRS filing deadline—is just around the corner. Soon you’ll be receiving tax forms such as your W-2 or 1099s, and you’ll start thinking about the life events that could affect your taxes in various ways.

This flurry of tax prep activity is the perfect opportunity to get your estate plan in order, too, and kill two birds with the proverbial stone.

Why? Because as you run down your list of “tax prep” questions, you will find that your answers could also impact your estate plan.

Some things to think about:

  • Did you get married or divorced? Did any of your children or grandchildren?
  • Did you welcome a child or grandchild into your family by birth or adoption?
  • Have any of your children or grandchildren reached the age of majority?
  • Have you dealt with illness or hospitalization? Have you incurred medical expenses?
  • Did you buy or sell a new property or any other major assets, like a vacation home?
  • Did you move to another state?
  • Did you buy, sell, open, or close a business?
  • Have you made any charitable donations?
  • Do you have any new life insurance or pension plans?

After you’ve answered these questions, get to work on gathering the corresponding documentation. That might include deeds, policies, and contracts as well as bills and receipts. Having all of this information handy can help you prepare your tax forms and whip your estate plan into shape.

Here’s how your tax-related changes can affect your estate planning.

If you already have an estate plan, your number one goal is to make sure everything still represents your wishes, taking into account the past year’s events. Maybe because of a change in circumstances, you need new or updated powers of attorney. Perhaps it’s time for an LLC or an update to your living trust, or maybe you need to update your asset spreadsheet. Or, if there have been births or deaths in your family, or, you’ve had a change of heart about who should inherit from you, you also need to update your plan.

If you don’t yet have an estate plan, having this information at your fingertips sets you up for a productive conversation with your estate planning attorney. After reviewing your legacy goals, your lawyer can draw up key documents, such as:

  • A will. Among other things, this document can ensure that your wishes—and not the laws of the state—determine how to distribute your estate.
  • A revocable living trust. In addition to a will, you can establish a living trust, which allows your estate to bypass the potentially long and costly probate process upon your death, gives you extra privacy, and helps to avoid the potentially costly guardianship or conservatorship court process (sometimes called “living probate”) if you become incapacitated.
  • A living will. This document expresses your desires regarding life-sustaining medical treatment, if you become incapable of communicating your wishes.
  • A durable power of attorney. This appoints someone to step in and take over your financial affairs if you are unable to do so, reducing the possibility of hard feelings among loved ones or the need for court intervention.

It’s a new year, and new possibilities are in the air. As long as you’re getting started on your taxes, take a few extra moments to incorporate your estate planning into the act as well. By getting organized in this way, you’ll be well on your way to making 2018 an amazing year.

As Anne Burrell once observed, “Organizing ahead of time makes the work more enjoyable. Chefs cut up the onions and have the ingredients lined up ahead of time and have them ready to go. When everything is organized you can clean as you go and it makes everything so much easier and fun.”

Dedicated to empowering your family, building your wealth and defining your legacy,

Marc Garlett 91024