1. It’s best for one member of the household to manage the finances.
It’s not uncommon for one person in a household to be the one who pays the bills and manages all the accounts. Some people don’t necessarily enjoy being involved in the finances, so by default, one person shoulders the responsibility. While this arrangement may work for a while, it can create long-term problems.
For instance, should the person in charge of the finances become ill, incapacitated, or die, it leaves the other partner or family members in a challenging position. They must put all the pieces of the financial puzzle together, and there is no guarantee it will ever be completed.
This is why communication about finances between spouses and family members is so important. Even if one person handles the finances, there should always be discussions about them. Both spouses, for instance, should be fully aware of all the bills they are responsible for and the accounts they have open in their name, from checking to retirement accounts.
2. You need to worry about estate taxes.
The media often portrays estate taxes as something we all need to worry about, and we should be prepared to set up a trust so we can better navigate these taxes. For some people, estate taxes are something they need to think about and plan for, but this isn’t the case for the vast majority of Americans.
In 2020 there is a federal exclusion limit of $11.58 million. For an estate exceeding that, say, valued at $14 million, the federal estate tax would only be owed on $2.42 million of that estate. However, if the estate is valued at less than $11.58 million, the heir or heirs would not have to worry about the federal estate tax. While many states have their own estate or inheritance tax on top of the federal tax, Michigan is a state that has neither.
Of course, regardless of the value of your estate, you should have an estate plan in place, including a patient advocate designation and power of attorney. Spell out your health care wishes and make sure all of your estate documents are organized and up to date. Clear communication is key to any successful estate plan. And if the estate tax threshold is decreased due to a change in law or political administrations, we promise to let you know how to plan for it.