Following the death of a loved one, their wealth and assets are transferred to their dependents. This process is known as estate planning. They are able to allocate their assets to beneficiaries as they see fit. This can include: charities, friends or family members. When a loved one participates in estate planning in advance, it can help to decrease or even diminish state and federal taxes on inherited wealth and assets.
It is important to have knowledge of how a personal injury settlement could affect your loved one’s estate as it may affect the total value of assets. Knowing how personal injury settlements can affect estates is important because the awarded personal injury monies are advantageous to victims.
Financial Documentation Following a Personal Injury
In order to prevent paying higher federal estate taxes, it is important not to overvalue the estate by not over-reporting assets.
Many financial losses are taken into consideration when looking at the average personal injury settlement. If the accident resulted in damaging injuries, the victim could be entitled to hundreds of thousands of settlement dollars. A victim’s finances could be impacted as a result. Following compensation, a personal injury victim will have to update all legal documents to to reflect their present circumstances. This includes: legal paperwork, estate planning, documentation, and wills.
Once a settlement is received, it is ideal to hire someone to assist in investing money safely into a fund that will protect from paying outrageous taxes and fees.
Estate Planning and Federal Taxes
There are few cases in which federal taxes are exempt. Such exemptions do have limits. The victim of a personal injury settlement may have to change the estate plan once the limit has been reached in order to abide by federal regulations. Awareness around tax laws in your state is beneficial when estate planning as many states are not fixed and do not charge property taxes. It is possible that you may have to pay both state and federal taxes.
It may be a good idea for you, your family, and your loved ones to develop an estate plan with a trusting and knowledgeable Sacramento estate lawyer. Contact an estate planner for further guidance.
Thanks to our friends and contributors from Yee Law Group for their insight into estate planning after a personal injury.