By Susann Mikkleson
Along with the promise of Spring, this time of year brings us tax season! Though it isn’t the same level or type of excitement as the “Holiday Season” that is usually referred to by the title phrase – anxiety might be a better term – all (or most) of us must endure it. As you prepare for the inevitable this year, keep in mind that the manner in which you prepare your estate plan may have a positive impact on your tax situation. It is too late for your 2006 taxes, but now is the time to consider your plans for next year and beyond.
We have been throwing around this term “estate planning” fairly often lately, and largely for self-serving reasons: we want you to remember the Rocky Mountain Farmers Union Educational and Charitable Foundation in your plans. That is important in order for us to ensure the future of the organization. Today, however, I am going to focus more on the estate plan itself.
What, exactly, is estate planning and why is it so important? Depending on who you ask, you may get various definitions of estate planning and its value. The title – estate – always brings to mind for me the big white house on the hill, with the acres of grassy land fenced in with rot-iron fencing and security cameras – you know, like you see in the movies (not a lifestyle most of us are intimately familiar with in agriculture, I’m sorry to say). Actually, everyone has an estate. If you own anything – a car, a farm animal, equipment, a life insurance policy, and certainly a home – you have an estate. An estate, for the purposes of estate planning, is the total value of all of an individual’s assets, including property, assets and cash held both solely and jointly (such as homes and property, bank accounts and investments, vehicles and equipment, and livestock), life insurance, retirement accounts, mutual funds and other assets (jewelry, guns and other items of value are also included). What happens to your estate upon death or transfer is up to you.
Guess what else – everyone has an estate plan too, and it may NOT be what you think. Whether you have developed an estate plan expressing your wishes or not, a plan does exist for dispersing your assets when you die. Upon your death, your estate will go through a probate process by which the state decides, based on state laws at the time, how your assets are distributed. If you do not have a documented plan of any sort, you obviously have no say whatsoever in that disbursement – not surprising.