New 2022 Exemptions and Three Steps to Prioritize Your Happiness and the Happiness of Your Loved Ones

Happy New Year! Changes in tax laws in 2022 include an increased gift tax exemption of $16,000 per person, per year, and a federal estate tax exemption which has gone up to $12,060,000 with a 40% top federal estate tax rate. Although many of you may not have estates in the area of $12 million, this exemption is scheduled to go back down to $5 million plus a bit more for inflation after 2025.

Not only is January the first month of each new year, it is also a time to celebrate Hunt for Happiness Week, which specifically takes place during the week of January 16-22, 2022. Happiness is something that humanity has spent a tremendous amount of effort pursuing throughout history. Early on, happiness likely came from simple victories such as having a full belly, surviving another day, or successfully staying warm. Over time, with the progress of civilization, happiness has been found in more complex sources such as art and literature, family and romantic relationships, religious worship, access to a wider variety of food and drink, education, and novel experiences. For many people, a lifetime is spent accumulating wealth in the effort to find happiness. But does the mere accumulation of wealth provide happiness? It depends who you ask, of course. But most people will agree that happiness can be found, whether it is purchased or sought otherwise.

When it comes to finding happiness for both you and your loved ones, consider how your estate planning might play a role in that process. The following steps can help ensure that the effort you put into your estate planning will contribute to your and your family’s happiness rather than diminish it.

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Step 1: Identify what makes you happy and prioritize it

Rather than simply assuming that property or cash will bring continuing happiness to not just you but also your family when you are gone, it is important to think about how you can use your money and property to generate happiness. Here are some examples:

  • Is there a hobby that you and your loved ones enjoy that you could more easily engage in if you had more accessible capital? Perhaps you and your children have enjoyed hunting or fishing trips together over the years. Maybe you and your loved ones have a love of live theater or musical performances that has brought you joy as you have shared such experiences.
  • Were your international travel experiences something that you will never forget and that you would like to help your loved ones experience as well?
  • Was your education a source of joy and satisfaction over the years that you would like your loved ones to have access to?
  • Is there a special vacation location or property that has several pleasant memories associated with it?
  • Whatever experiences and activities have brought you happiness throughout your life, the first step is to identify them and determine whether or not you would like to make them a priority in your estate planning

Step 2: Review your important documents to see if they reflect your priorities

Once you have identified your priorities, you should review your important estate documents, such as life insurance and retirement account beneficiary designations, wills, trusts, pay-on-death designations on accounts, and the deeds and titles on your property. Do you understand how your accounts and property will be transferred or paid out when you die? If so, will that process realistically result in your accounts and property supporting the priorities that you have identified in Step 1? Or does your current plan risk allowing the accounts and property to be used or spent on things other than your priorities? Ensure that you are aware of and comfortable with the potential results of your current plan.

Step 3: Contact your advisor team to make necessary changes or additions to your planning

If your current plan is no longer in line with your priorities, then it is crucial to quickly address these issues with your professional advisors, such as your attorney and financial planner. Your attorney can help you craft provisions in your will or living trust that will set aside a sum of money to fund education for successive generations, travel, hunting trips, family reunions, or other experiences that create happy memories you would like to pass on. Further, in order for you to protect your property from being squandered on material possessions or expenses that bring little happiness to your loved ones, you may need to change beneficiary designations on life insurance, retirement accounts, or cash accounts to be payable to a trust, or make other protective arrangements to achieve your priorities.

It is only with careful planning that you can turn things as mundane and inanimate as money and property into experiences and opportunities that can bring lasting happiness to you and your loved ones. With proper direction from you, your advisors have the tools to help you effectively meet this worthwhile goal. Such efforts will undoubtedly increase the likelihood that you and your loved ones will find the happiness and satisfaction in life that is readily available to all who diligently seek it.

San Clemente Estate Law, P.C.

Jennifer Elliott, Attorney at Law

Jennifer Elliott, Attorney at Law is an estate planning and probate lawyer in San Clemente. The firm, San Clemente Estate Law, provides probate services for decedent's estates in Orange County and San Bernardino County as well as estate planning to clients throughout California.