Who Needs an Estate Plan?

Estate planning may seem like a complex task reserved for those with large estates, but in reality, it’s essential for everyone. It involves protecting your life’s work, celebrating your financial journey, and ensuring your wishes are carried out to friends, family, and future generations.

This article will discuss what estate plans are, the benefits of creating one, and a few tips for getting started. If you’d like to get started planning your estate, schedule a call with one of the estate planning strategists at ARQ Wealth Advisors.

What is Estate Planning?

Estate planning is the process of ensuring that all of your belongings and assets are handled according to your wishes after you pass on. This is a wide-ranging process that includes activities like creating a will, establishing a plan for your assets, and creating the necessary legal entities (such as a trust) to hold your assets. 

The estate planning process involves creating a plan for all of your assets, including:

1. Real estate holdings (your home or any investment properties)
2. Bank accounts (checking and savings)
3. Investment portfolios (IRAs, 401(k)s, etc.)
4. Automobiles
5. Life insurance policies
6. Business interests
7. Collectibles
8. Artwork

If you don’t create a plan for your assets, the burden may fall on your family and close friends. Determining what happens to your assets will become their responsibility, which could sow division amongst those you care for the most. In some scenarios, failing to plan for your estate also means that your belongings fall into the hands of the government.

Minimizing Your Tax Burden

Minimizing taxes and fees also plays a significant role in estate planning. Passing down your possessions almost always incurs an array of potential taxes, including:

1. Estate taxes: This is a federal estate tax on your right to transfer property. However, this tax is only levied on estates worth more than $13,610,000 as of 2024. If your estate is worth less than this amount, you do not need to worry about paying estate taxes.

2. Gift tax: This tax applies to property that you transfer to others while receiving nothing in return. As of 2024, the federal government allows you to gift up to $18,000 annually ($36,000 for married couples) to another individual before paying a gift tax. For this reason, gifting portions of your estate throughout your life can greatly reduce your tax burden. 

3. Inheritance tax: Some states impose this tax on the recipients of an estate. As of 2024, this tax only applies to Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania residents. It does not apply to residents of Arizona. 

4. Capital gains tax: If you plan to sell assets (such as real estate investments or stock portfolios) as part of your estate planning process, you may be subject to capital gains tax. This tax depends on a handful of factors, such as your income level and the length of time that you’ve held an asset.

With so many taxes to consider, working with a skilled estate planning strategist is essential to ensure you are not paying more than your fair share of taxes. Planning your estate by yourself is an easy path to overpaying, extensive legal fees, and court costs.

Estate planning may already sound daunting and potentially expensive. So, the question is: Is it really worth it?

Why Do I Need an Estate Plan?

If you do not create an estate plan or designate beneficiaries, your estate will likely be distributed according to your state’s intestacy laws. This means that your assets will likely go through a court-supervised probate process. However, the laws vary on a state-by-state basis. There’s a chance that your intended beneficiaries may not receive your assets at all. Or—more likely—your spouse, children, and family members will ultimately receive a fraction of your assets after paying for unnecessary taxes and fees. 

Conversely, creating a detailed plan can help you ensure that your assets will be passed on to the proper beneficiaries. You will also be able to take the necessary steps to minimize your taxes and fees, maximizing the amount your beneficiaries will receive.

Benefits of Estate Planning

If you have not started planning your estate yet, you may be pleasantly surprised by the number of benefits associated with the process:

1. Estate planning puts up safeguards to ensure your assets are distributed as you intend.
2. Estate planning protects your assets from creditors, divorces, and other people who may seek to take a portion of your estate.
3. Estate planning minimizes potential conflicts among your beneficiaries if no plan is in place.
4. Estate planning documents your wishes regarding medical care.
5. Estate planning keeps your assets out of probate and maintains privacy concerning your belongings.

Getting started with estate planning is also fairly straightforward. The simplest, smoothest way to get started is to schedule a call with one of the estate planning strategists at ARQ Wealth.

Basics of Estate Planning: Getting Started

The level of estate planning services you need will vary depending on your planning needs. The following steps are how to get started:

1. Take inventory of your belongings: Create a list of all the assets that you own. This list should include tangible assets (cars, real estate, jewelry) and intangible assets (bank accounts, investment portfolios, life insurance policies). 
2. Choose your beneficiaries: These are the people you want to receive each portion of your estate. It’s also advisable to designate backup beneficiaries in case a person is unavailable to receive your assets for any reason.
3. Partner with an estate planning strategist: You’ll also want to find a reputable wealth professional and estate attorney to help you navigate the rest of the process. They will be able to help you create the necessary legal entities, ensure that everything is filed accurately, and make sure that you are minimizing your tax obligations. 

Estate Planning: What Else to Know?

Here are some additional elements of estate planning that you should know:

What is power of attorney (POA)?

Power of attorney is the authority that you give someone else to make legal, financial, or medical decisions on your behalf. People often assign power of attorney to a close family member, friend, or estate attorney. This person will become legally responsible for making decisions on your behalf if you cannot make your own decisions.

What is a will?

A will is a legal document stating how you want your executor (the person legally obligated to administer your estate) to distribute your assets when you die. Creating a will can reduce potential conflicts among your beneficiaries when you pass on.

What is a trust?

A trust is a fiduciary arrangement that allows a third party to hold assets on behalf of a beneficiary. This typically makes it easier to transfer money, physical assets, or anything else of value to your beneficiaries. Using a trust often has significant legal and tax advantages. Trusts can also be arranged to specify precisely how and when the assets are passed to the beneficiaries.  

What’s the Difference Between a Will and Trust?

Although wills and trusts are both important parts of the estate planning process, they each serve different purposes. A will is a legal document that provides instructions on how to distribute property to beneficiaries after death. A trust is a more complicated legal contract that lets you transfer assets to an account that another person manages.

What are the Most Common Types of Trusts?

There are many types of trusts, each designed to serve a unique purpose. Some of the most common trusts used in estate planning include revocable, irrevocable, and charitable remainder trusts. Each of these trusts varies widely in their use, and it’s best to speak with a professional to learn which type of trust may be best for you.

Creating an Estate Plan With ARQ Wealth

If you’re looking to start planning your estate, there’s no better option than ARQ Wealth, one of the top estate planning strategists in Arizona. The team at ARQ Wealth specifically limits each advisor to just 60 clients—significantly below the industry average of 120 clients per advisor. This guarantees that each ARQ Wealth client receives white-glove service from their advisor.

ARQ Wealth takes a simple yet comprehensive approach to estate planning that includes:

1. Scheduling an initial exploratory call: You will chat with a strategist on the ARQ Wealth team to share more about your needs.
2. Collecting necessary documents: From there, your advisor will collect the necessary documents and open any accounts you may need to get started. At this stage, your ARQ Wealth professional can also recommend an estate planning attorney if you require an estate planning team. 
3. Routine check-ins: Customers can check in on their estate plan whenever they want. ARQ Wealth typically requires check-ins at least once a quarter.

Interested in estate planning within Arizona? Call us today at 480-214-9572 or contact us online to learn how you can get started today.