Estate planning is the method of dividing up your estate amongst your dependants. It involves you explicitly stating whom you want to leave each of your assets to, when and how you want them to have it. You could divide it amongst the members of our family or leave everything to preferred organizations. Estate planning reduces or eliminates state and federal taxes that the government charges on the income from your estate upon your demise.
After winning a case with the help of a personal injury lawyer, the settlement or award may greatly affect the status of one’s assets, which can also affect how one plans their estate, including:
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 the said amount, the plaintiff would have to alter their first estate plans to cater to 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 has, therefore, no need to worry about the State property taxes as much as they would federal taxes.
Medical Expenses
The expenses that may arise from an accident could be hefty in the long run. The plaintiff may have to rely on medication for a long time from the moment the accident happens. It is prudent to provide for that in the current estate plan so as not to over-report their worth. If expenses are not recognized as so, 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, the plaintiff may want to consider consulting a lawyer.
Proper Documentation
After an injury, so many changes occur. The plaintiff could be injured to a point of disability. That changes their 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 any other legal document. If the plaintiff is a child whose parents have died in an accident, there may be a need to create a trust for them.
Sound Investment Plan
After the settlement, the plaintiff may want to hire someone 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 his medical expenses without the fear of depleting the money with the said fees.
Estate planning can be very beneficial to family and loved ones after someone passes, especially if a personal injury award is involved. If you’re ready to take control of your assets, contact and estate planner, today.
Thanks to our friends and co-contributors from Personal Injury Lawyer of Miami for their added insight into the effects of a personal injury award on estate planning.
