Estate planning can be a difficult subject to address. When a person dies, they inevitably leave things that were earned while they were alive, such as real estate, cars, investments, and bank accounts. These are what the law refers to as an estate. To ensure a peaceful co-existence among your dependents, you should plan so that your estate is distributed per your wishes among your loved ones. In estate planning, you must explicitly state to whom you want to leave each of your assets, and when and how you want them to receive it. Proper estate planning may help to reduce or eliminate the state and federal taxes that the government charges on the income from your estate upon your demise.
If you have received a settlement after filing a personal injury claim, the compensation you receive may affect your estate. Here are some ways in which your estate planning may change after a personal injury award:
Federal and State Taxes
Federal estate taxes have a set limit for exemption. Currently, the first $5.45 million is exempt from taxation for individuals. If the settlement exceeds that amount, the plaintiff would have to alter their first estate plans to consider the increased value. State estate taxes are not fixed. In fact, some states do not charge any property tax. However, gifts are mostly subjected to tax. The plaintiff may have no need to worry about the state property taxes, as much as they would federal taxes.
The medical expenses that may arise from an accident could be hefty in the long run. The plaintiff may have to rely on medication or other medical treatment for a long time after the injury. It may be prudent to provide for the expense in the current estate plan, so as not to over-report your worth. If expenses are not recognized, they could add value to the estate and cause the plaintiff to pay higher federal estate taxes for money that is not income. To effectively look into the issues of medical coverage, you may wish to consult a Roseville CA estate planning lawyer.
After an injury, many changes occur. The plaintiff could be injured to a point of disability. A permanent disability may change their legal status, and all their documents need to be adequately modified to reflect this. The official records include wills, estate planning documents, the power of attorney, and other legal documents. If the plaintiff is a child whose parents have died in an accident, there will be a need to create a trust for them.
Sound Investment Plan
After a settlement, the plaintiff may want to consider hiring a professional to invest the money effectively for them. The investment plan should be carried out as soon as possible to enable the plaintiff to pay for medical expenses without the fear of depleting the settlement right away.
Estate planning may be difficult, but it could be invaluable to the people that the decedent leaves behind. When a person dies without a will or a plan for their estate, the state provides a plan for the division of their assets. To avoid leaving your estate as a potential burden to your loved ones, contact an estate attorney today.
Thanks to our friends and contributors at Meyer & Yee, P.C. for their insight into the effects of a personal injury case on the decedent’s estate.