Webinar Recap: Estate Planning For Business and Real Property Owners
In our May webinar, Partner Imants Holmquist was joined by Associate Attorney Grayson Chester to discuss estate planning, a new practice area for the firm, with a focus on real property and business.
Think of estate planning as strategic planning. The way you approach estate planning during life impacts the amount of work ahead for your family should you become incapacitated or die. Because estate planning is so much more than putting in place a will, it’s worthwhile to invest in good counsel for estate planning, including your attorney, your CPA, and your wealth advisor.
Planning for Your Life (Incapacity)
Estate planning isn’t just about dying. It’s about living, too.
We don’t like to think about it – especially in a healthy state like Washington – but it’s important to plan for incapacity because incapacity has a way of becoming very costly very quickly when it catches us by surprise. It’s better for you and your loved ones to think about:
Who will take care of me if I become incapacitated?
How will my medical records be accessible to my chosen person?
Who will pay my bills if I am no longer able to?
How will I pay for long-term care?
Are means-tested government benefits like Medicaid an option?
Who will take care of my minor children or pets?
Who will protect my plan from future law changes while I’m still alive?
Answering these questions now delivers important benefits. First, your responses will inform your plan. You can include them in your financial and healthcare powers of attorney documents, your advance directive (“living will”) and HIPAA authorizations. These documents can protect you from a guardianship hearing, an expensive and traumatizing court proceeding. Additionally, your decisions on these matters may make the case for creating a trust to provide additional financial security.
Planning for Your Death
Traditional estate planning empowers you to plan for death. A basic estate plan answers common questions like:
What can I control “from the grave”?
Will my estate have to go through probate?
How does Washington State’s community property law impact my tax planning?
Who will take care of my minor children?
Will my children from previous relationships be treated fairly?
What if I think my beneficiaries are too young or don't survive me?
What if my relatives challenge my plan?
What will happen to my business?
Business owners and partners in real property investments need to create an estate plan specifically for the entity, including:
What will happen after I pass?
Who will take over?
Will my partners buy the estate out?
What is the succession plan, especially for family businesses?
Planning for Taxes
A major part of estate planning focuses on strategies to maximize tax efficiency. For business and property owners in Washington State, there can be competing state and federal regulations.
Although state estate taxes are not commonplace in the US, Washington has a particularly robust state estate tax system which goes into effect at a relatively low dollar amount compared to the federal estate tax ($2,193,000 versus $12,060,000 of applicable exemption). Washington’s more aggressive state estate tax system also makes it much more complicated for couples in the state to combine their exemptions together, meaning most couples in this state end up having to share only a single exemption (instead of having two). To manage these factors, Washington citizens very often need more Washington-specific, tax-conscious planning.
It’s important to remember, too, that estates and trusts must pay income taxes. So although we have no state income tax, your estate will nonetheless have to manage federal income taxes. It’s crucial to focus on income tax planning to mitigate the tax bill and capital gains issues for your beneficiaries, even for moderate estates which may not find themselves subject to an estate tax.
Keeping it Current
Your estate plan should never be a one-and-done project. Because things change – laws, your net worth, family situations – you should update your estate plan every four to six years and after every major life event, such as marriage, birth, divorce or life-changing wealth event. The best way to ensure peace of mind for yourself, your family and your business colleagues is to keep your plan current.
It's especially important to get your estate plan reviewed by a lawyer if it was created before 2017. That's when Washington State's Power of Attorney Act changed many of the rules governing grants of specific powers to your agents.
As you can see, estate planning truly is a strategic activity. Reach out to Grayson if you’d like to discuss your personal and business estate plan.
This information doesn’t constitute investment, financial or legal advice. Always check with an attorney, CPA or wealth management expert before making decisions.
