If you’ve won a personal injury settlement, this money could affect the value of your assets.
This money could be immensely beneficial for accident victims, as any experienced personal injury lawyer could attest, but it’s wise to understand how a settlement may affect your own estate.
What is estate planning?
Estate planning involves dividing your assets among your dependants. You have the ability to state which individuals should receive which assets, and when they should receive them. You can divide your assets between family members and close friends, or you could even leave your assets to a charity. Proper estate planning can help reduce (or even eliminate) certain state and/or federal taxes on your assets and income when you pass away.
Collecting Financial Documentation After an Accident
The typical personal injury settlement can account for many financial losses. An injured victim might end up collecting hundreds of thousands of dollars in a settlement, especially if he or she suffered disabling injuries. This can have a major impact on the individual’s personal income or assets. In order to document expenses and compensation, the individual may need to adjust certain documents to reflect their current state.These documents may include wills, documents pertaining to estate planning, and other paperwork that may be necessary in a legal setting.
It is important to be wary of over-reporting assets in this case. If expenses are not recognized accurately, the estate may be assessed at a higher value and therefore may receive higher federal estate taxes.
Federal and State Taxes and Estate Planning
Some federal estate taxes can be exempt, but there is a set limit for exemption. Once a settlement reaches the limit, the recipient may need to change their estate plans to comply with federal regulations. State estate taxes are not fixed — some states charges no property tax at all — so it’s important to know the laws in your own state. You could have to pay both types of taxes or only one.
Creating a Solid Investment Plan
After receiving a settlement, you may want to hire someone who can invest your money in a safe and effective fund. It’s important to work with someone who will make sure that you are able to pay for current expenses, while still keeping your award safe from unnecessary fees and taxes.
It may be very beneficial to your family and loved ones to plan out your estate thoroughly with an estate lawyer Sacramento trusts, especially if a personal injury award is involved. If you’re ready to take control of your assets, contact an estate planner today.
Thanks to our friends and contributors from Yee Law Group for their insight into estate planning after a personal injury.