If you’ve won a personal injury settlement, it’s important to keep in mind that this award may affect your assets. This money could be immensely beneficial for accident victims, as any experienced personal injury lawyer Phoenix AZ might attest, but it’s wise to understand how a settlement may affect your own estate.
What is estate planning?
Estate planning is the process of dividing your assets among your dependants. You state explicitly which individuals should receive which assets, and you may also state when they should receive these assets. You have the option to divide your assets among your family members or other close friends, or you could leave everything to a certain organization or charity. Estate planning may reduce or eliminate federal and state taxes that may be placed on your overall estate income after you pass.
Collecting Financial Documentation After an Accident
The expenses that may arise from an accident could be hefty in the long run, and a fair settlement would likely address these costs. The injured victim could be injured to a point of disability and may have to rely on medication or therapy for a long time. In the case of a permanent disability, the individual may need to adjust certain documents as necessary to reflect their 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
Federal estate taxes have a set limit for exemption. If the settlement exceeds this amount, the plaintiff may have to alter their estate plans to comply with these regulations. Estate taxes for state governments are not fixed, however, and some states charge no property tax at all whatsoever. It is prudent to be aware of the laws in your state so you know if you’ll have to worry about paying 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, 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 Alex & Saavedra, P.C. for their insight into the effects of personal injury settlement on estate planning.