If you recently received a substantial personal injury settlement award, you may need to consider planning your estate or else updating your existing plan. This can greatly benefit your heirs because not only will it make your final wishes clear, it can also offer significant federal and state tax advantages to them after your passing. This is because certain estate planning tools eliminate or reduce the estate taxes your heirs would otherwise have to pay.
With the help of your personal injury lawyer, you may have won a case that resulted in you recovering your damages associated with the injury. A settlement award might compel you to make changes about how you want your estate handled after your passing, and to preserve your legacy. A lawyer, can review your circumstances and subsequently provide the legal guidance you need. Below are some of the matters that your lawyer may want to address in order to protect your best interests.
Federal Estate Taxes
Tax laws are always subject to change which is why it’s important to work with an estate planning lawyer. Estate planning lawyers also keep abreast of pending legislation that could affect the choices of a client. There is a certain amount of money that is exempt from federal taxes when it comes to the value of an estate. The amount is currently $5.45 million but that changes from time to time, so if your estate value will be close to, or in excess of that amount then talk to your estate planning lawyer about this. State taxes are usually less of a concern, but your lawyer can provide you with information specific to your state.
Anticipated Medical Costs
If you are still recovering from your personal injury, you will have medical expenses until such time as you recover. Depending on the nature of your injury and your body’s ability to recover from it, you may a lifetime of medical needs. If the injury precludes you from being able to return to work and generate an income, you may be entirely dependent on the settlement to live on. Your estate planning attorney can determine what percentage of the settlement award is considered income. There will likely be a portion that is non-income because it’s reimbursement for expenses and therefore should not be subject to taxes. This should be reflected in the estate plan as well because it might have a bearing on the amount of estate taxes your heirs may have to pay.
Consult an Estate Planning Lawyer
Protect your legacy and the rights of your heirs by planning your estate following the receipt of a personal injury settlement award. If you already have a will or trust in place, it’s important to update it in light of your recent litigation. You may have additional reasons to make changes in an existing estate planning tool.