We are fortunate to have Johni Hays, J.D., provide Meth-Wick residents with advice on values-based estate planning.

Johni visits Meth-Wick each month to meet with residents. She will be on campus this spring and summer on: 

• April 21
• May 19
• June 23
• July 21

If you would like to meet with Johni, please contact Teresa Dusil, Director of Operations at tjkdusil@methwick.org  or 319-297-8603 to schedule a confidential appointment. You can request an in-person meeting or a virtual meeting via Zoom.

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 Often, beneficiary forms with life insurance policies, retirement plans, and annuities become out of date over time.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). Charities as beneficiaries are exempt from Iowa inheritance tax as well as spouses, children and parents. The Iowa inheritance tax will phase out over the next few years and will be completely eliminated by January 1, 2025.
• 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 2022 only applies to estates worth more than $12.06 million, so not many estates have to pay this tax.

If you have your own questions about these topics or any others related to estate planning, make an appointment to meet with Johni on one of the dates listed above.

 

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.