At a Million Dollars, Get Protection.

You may wonder when you really need the protection of an estate plan. While there are a lot of things that can trigger the need for one (even if your estate is smaller), one important trigger occurs when you and your spouse have a little over a million dollars of assets–including equity in your home.

The reason for this particular trigger is the estate tax in Washington. The first million is the hardest for a person to earn, because the assets you have grow in value as you continue to earn money. But once you have a million dollars in assets, if you manage it fairly well it is reasonably likely to double in ten years even if you don’t add new earned income to your portfolio.

And while it is good to update your estate plan more frequently, in reality ten years may easily pass before the next time you think to do estate planning.

Washington State starts taxing your estate at $2,079,000, at 10%. So if you die seven or eight years from now when you and your spouse have $2.5M (between investment income and additional earned income), an estate plan will save your heirs about $42,000 in taxes. If you die twenty years from now with $5.3M, it will save closer to $300,000 in taxes. Either way, an estate plan is a sensible investment with a high ROI.

So whether you ask me to draw up your estate plan or have another practitioner do it, it’s smart to be proactive.

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