3 reasons to make a will or trust this tax season

The days are getting longer, the weather is getting warmer, and spring is in the air. That can only mean one thing: it’s tax season!

This year’s income tax filing deadline is Monday, April 15, 2024. Whether you’ve already filed your return or you’re still pulling together your documents, tax season is also a smart time to create or update your estate plan. That’s because you have all your financial documents and information close at hand, and you’re likely reflecting on the people and causes you supported last year.

Estate planning is the process of deciding who receives your assets and manages your estate after you pass away. Depending on your financial situation and personal needs, this could include steps like writing a last will and testament or setting up a revocable living trust.

Creating an estate plan may be the furthest thing from your mind right now — after all, you’re already focused on preparing one legal document, so why stress over another? But there are three compelling reasons why you should consider creating a will or trust this tax season. We’ve broken them down below.

1. You have a clear picture of all your assets.

During tax season, your property and financial assets are already top-of-mind. You’re likely looking at tax forms for the properties you own and reviewing statements for your financial accounts.

Since you’re already thinking about your assets, it’s easier to take the time now to decide who should inherit them when you pass away — or to make sure your estate plan still covers everything you own.

If you don’t have an estate plan already, you can get started by jotting down any assets you’ve received tax forms for, like your bank or investment accounts. Remember to include identifying information, like the custodian and account number. Once you’ve done that, continue building out your list by adding other assets you own.

If you already have an estate plan but haven’t updated it in a few years, it’s a great time to revisit it. Does it cover all your current assets, like your home, vehicle, and financial accounts? Does it reflect your current relationships with your spouse, children, and family? Was it made in the state you live in now? If not, it’s probably time for an update.

Here’s a good rule of thumb: If your tax filing status has changed, your estate plan likely needs an update, too!

2. You can make sure your estate plan is tax advantaged.

Prepping your tax return can feel like a chore, but tax season is likely the time of year you’re the most aware of your financial situation. Having a handle on your wealth can help you determine if your estate is likely to be subject to an estate tax, and whether you should speak to an estate attorney.

Estate tax is a tax on your assets after you die, and can be collected on both the state level and the federal level. The 2024 US federal estate tax exemption is $13.61 million for individuals and $27.22 million for married couples. This means your estate likely won’t owe any federal estate tax if your property is valued at less than this amount (though you could owe them on the state level, depending on which state you live in at the time of your death).

Inheritance tax is a separate tax your heirs might have to pay when they inherit assets from your estate. There’s no federal inheritance tax, and most states don't collect inheritance tax either — but a few do, so it's something to consider.

If you own a lot of valuable assets, estate taxes could consume a significant portion of your estate if you don’t plan for them. Understanding your wealth — and the effect of estate taxes — will help you create an estate plan that’s the best fit for you and your loved ones.

3. It’s one of the most important legal documents you’ll ever make because it affects your loved ones.

There are several important legal documents you’ll prepare in your lifetime, but your estate plan might be the most critical. With a will or trust, you can choose who will inherit from you, name guardians for your children, nominate caretakers for your pets, and even donate part of your estate to a cause you care about. By creating an estate plan, you take control of your legacy — and can even help make the world a better place while doing it.

How to make or update your estate plan this tax season

You might find the idea of making an estate plan about as fun as filing your taxes, but you can do it in less time than it takes to watch an episode of your favorite Netflix show. Plus, you’ll gain the peace of mind that comes from knowing your loved ones are protected.

There are many different ways to create your will or trust, and using an online template is a popular option. If you don’t think your estate will be subject to estate tax, you may consider using an online will-maker like FreeWill to fill out your free, legally-valid will forms in less than 20 minutes. Just answer a few questions about yourself, your estate, and your wishes, and our will-making tool provides you with your forms and instructions for how to make your will valid in the state where you live.

If you want to avoid the probate process, consider setting up a revocable living trust instead of a traditional will.

One last thing: If you have a large estate or complicated family dynamics, it’s generally a good idea to work with an estate attorney. They can help you create an estate plan that’s the best fit for you and the people and causes you love.

Ready to get started? Create your estate plan with FreeWill today.