Q & A Estate Planning with Johni Hays, JD

Q & A Estate Planning with Johni Hays, JD

We are fortunate to have Johni Hays, JD, provide Meth-Wick residents with advice on values-based estate planning. Back in person by popular demand, this month Johni will resume her monthly visits, which had been virtual via Zoom due to the COVID-19 pandemic precautions. She will be at Meth-Wick on Thursday, May 20th.

If you would like to meet with Johni, please contact Teresa Dusil, Director of Operations at 319-297-8603 or at tjkdusil@methwick.org to schedule a confidential appointment.

We asked Johni about the most common questions she hears when she meets with residents regarding estate planning.

1. Do I need a trust if I already have a will?

While a revocable living trust and a will are similar in that they both can distribute assets, a trust goes through a different process than the execution of a traditional will and avoids the costs and delays of probate.

One common misconception is that only the super wealthy need a living trust. This is false. A trust is an excellent financial tool for anyone, as it can save time and provide tax planning opportunities. Consider a trust particularly if any of these situations apply to you:

  • Second marriage
  • Special needs family members
  • Spendthrifts, addictions with family members
  • Estate tax reduction/elimination
  • Leaving your legacy though gifts to your favorite nonprofits

There are several different types of trusts. The right one for you will depend on your unique situation.

2. Is my estate plan still valid? Does it need to be updated? 

As a general rule of thumb, an estate plan should be reviewed or updated every three to five years. It’s important to remember that an estate plan is more than just a will. Often, beneficiary forms with life insurance policies, retirement plans, and annuities become out of date over time. Other life events are a cause for reviewing your estate plan, including:

  • If you moved to Iowa from another state
  • If you get unmarried or remarried
  • If you add children or grandchildren to your family
  • Death in the family
  • Whenever there are major changes to the tax laws
  • Benevolent desires change
  • Your assets have increased significantly in size

3. Will there be any taxes in my estate?

The answer to this will depend on your specific situation, but there are three different types of taxes that can come into play in estate planning:

  • Iowa inheritance tax. This tax may apply, depending on who is the beneficiary of your estate. The rate of tax the beneficiary pays will depend on their family relationship to you (e.g., direct relatives will pay a lower tax rate than friends).
  • Income tax on traditional IRAs and 401(k) plans (not Roth IRAs). Retirement plans are heavily taxed. Typically, 100% of the account you leave to family or friends is taxed as income to them. If a charity is named as a beneficiary, however, it can receive the IRA free of all taxes—making IRAs the smartest asset to use for charitable gifts from your estate.
  • Federal estate tax. Currently this tax for 2021 only applies to estates worth more than $11.7 million, so not many estates have to pay this tax. However, under the Biden administration there are proposals to lower the threshold so that many more families may be paying federal estate tax in the future.
Johni Hays, J.D., FCEP Senior Vice President Thompson & Associates

If you have your own questions about these topics or any others related to estate planning, make an appointment to meet with Johni on April 22nd or May 20th.

Legal and financial advice are case specific. The content of this article is general and informational in nature and is not intended to recommend a particular course of action for you. You should seek the advice of your own legal or tax counsel before taking any action based on the contents of this communication.