Tax documents and a calculator laid out on a table

Estate Planning Considerations for Tax Season

Tax season can be stressful, particularly if you have a complex financial situation. And when you’re going through the monotony of filing taxes, the last thing you want is to complicate things by diving into estate planning, too.

However, as many attorneys and financial experts will tell you, tax season is a great time to review and update your estate plan. You’ve already gathered all your financial documents, and any changes in your finances can (and should) lead to an updated estate plan. 

Here are some things to remember as you update your estate plan this tax season.

Distributing Assets in Advance Can Save on Taxes

After your death, you want your assets to go to your loved ones. However, if you have a large estate, your family members might find themselves facing more taxes than they’d imagined.

One way to minimize the taxes they have to pay is by gifting money in advance. This can be a helpful strategy for anyone with a large estate. 

As tax season approaches, you might consider sending your family members monetary gifts below the gift tax threshold. In the year 2024, an individual can receive a gift of up to $18,000 per year without having to pay gift tax. 

Directly Paying Tuition or Medical Costs Can Also Save on Taxes

If you have significant assets and want to gift more than $18,000 to one person a year, you might consider directly paying for a loved one’s medical bills or tuition. When you cover expenses directly, there’s no gift tax.

If Your Finances Have Changed, Your Estate Plan Should, Too

During tax season, you get to take a close look at your finances. If your financial situation is more or less the same as it was a year ago, your estate plan may not need any changes. However, if you have acquired new assets or seen a significant change in income, it’s best to update your estate plan accordingly.

For instance, if you’ve purchased a new vacation rental property over the last fiscal year, your estate plan should be updated to include what should be done with that property after your death. 

If your estate plan doesn’t specify what happens to a given asset, your loved ones may find themselves locked in a legal battle while they’re grieving. That’s not a legacy anyone wants to leave behind.

Estate Plans Should Be Regularly Revisited

It’s easy to think of estate planning as a “set and forget” process, but that couldn’t be further from the truth. Annually reassessing your estate plan will help you make sure it’s current, and because you’re focused on financial paperwork anyway, tax season is the perfect time. 

For example, imagine that your first grandchild was born in the past year. You probably want to ensure your grandchild inherits something when you pass away, so you might want to update your estate plan to specify what assets should be passed on to that grandchild.

Don’t neglect this step. If you die with a will that hasn’t been updated in years, it can be more harmful than helpful to your surviving family.

Need help with estate planning?

Your estate plan is much more than just a formality. It ensures your loved ones will be taken care of after your death and that your assets are distributed according to your wishes. 

When it comes to estate planning, you don’t want to leave anything up to chance. At OC Wills and Trusts, our estate planning attorneys have been helping Orange County residents give themselves and their loved ones the gift of peace of mind since 1992. Get in touch today to schedule your complimentary consultation!

Brian Chew, the managing partner of OC Wills & Trust Attorneys, has extensive experience in the areas of estate planning, asset protection planning, business succession planning, long-term care planning, and veterans’ benefits. By devoting his practice to estate planning matters, he has founded a firm that strives to provide exceptional service to their clients by working closely with individuals and their families to create comprehensive and customized estate plans. For the past twenty five years, Brian has served thousands of clients in the matters of estate planning, wills and trusts. If you have any questions about this article, you can reach Brian Chew here.