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Here’s another good reason to review your will and estate plan

Heres-another-good-reason-It’s very common for people’s wills to provide that the executor will pay the estate’s expenses out of the estate’s assets, and what’s left over will be divvied up among the heirs.

That’s usually a good plan. But one of the many reasons for regularly reviewing your estate plan is that changes in your financial arrangements could result in some of your heirs being unfairly burdened with estate expenses, while others will get a windfall you didn’t intend.

Here’s why this is true: An estate’s expenses are paid only by the heirs who receive property under the will. But very often, some heirs receive substantial property outside a will – for instance, they’re beneficiaries of an IRA or a 401(k) plan, a co-owner of a joint bank account, or the payee of a transfer-on-death brokerage account.

Life insurance proceeds are another important type of property that people receive outside a will.

And unless you specify otherwise in your estate plan, the beneficiaries of these “non-probate” assets won’t have to contribute at all to the estate’s expenses.

That means that if you’ve recently opened a joint account with someone, or named them as a beneficiary of a life insurance policy, or made them the beneficiary of an IRA or brokerage account, you might have unwittingly burdened some of your heirs with a lot of expenses to which your other heirs won’t have to contribute.

This is important because an estate’s expenses can be, well, expensive. Expenses can include:

    • Estate taxes. Even if federal estate taxes aren’t an issue, many states have their own estate taxes, often with a much lower threshold than the federal tax.
    • Medical and funeral expenses.
    • Professional fees for accountants, appraisers, etc.
    • Probate fees.
    • Fees for transferring title to assets.
    • Local taxes on a decedent’s personal property.
    • Certain debts of the decedent.

If you think your expenses could become significant, or you’ve recently arranged for substantial assets to pass to your heirs outside of probate, this might be a good time to schedule a review of your estate plan.


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