Estate planning is an important step for you and your family, as it helps to protect your loved ones and your assets in the event of an unfortunate incident. We all know that things can happen unexpectedly in life; you may get hurt the next day and become unable to make important decisions for yourself and your family. That’s when estate planning comes into the picture.
To help you understand more and get started, here are some of the most important things you should know about estate planning:
1. Probate
One of the first things you need to know is the probate process. The experts from Heritage Elder Law explain that this is the court process in which assets will be settled upon your death, unless you already have an estate plan in place, or the estate is too small for probate. The probate process is a long and expensive process, in which lots of paperwork has to be filed and an accounting process has to be implemented. This sometimes leads to contested accounting of estate assets, which takes even longer to resolve. The whole process can cost you significant legal fees and take months to complete so it is better for you to plan for estate transferring outside of probate. Find a reputable estate planning attorney to help you with the complicated process and ensure that your property and family are protected.
2. Assets to Include
You should consider the assets you want to include in your estate plan so that these assets will be easily transferred to your beneficiary upon your death. Usually, people will include the following assets: real estate, vehicles, checking, saving and investment accounts, business ownership, intellectual property, life insurance, and personal property.
You should also know that your beneficiaries may have to pay federal taxes for larger estates, and some states also charge taxes on smaller sums of money. If your estate is likely to be taxed a lot, you may want to reduce that tax by giving inter vivos gifts, or gifts you made during your lifetime. If the gifts are below the threshold for gift tax, then you may just be able to avoid gift tax and reduce estate tax.
To avoid conflict on asset transfer after your death, it is also important to clarify if any of the assets you own is under joint ownership with someone else, in that case, you need to determine the correct amount or percentage of the ownership that your inheritors will have. For certain assets like life insurance policies, you might have already chosen beneficiaries when purchasing the policies, so you should make sure they are correctly listed in your estate plan.
3. Beneficiaries
One thing to know is that not every asset can have a named beneficiary, but financial and most everyday assets can, such as retirement plans, life insurance plans, jewelry, artwork, and antiques. Having beneficiaries named for these assets will help avoid probate and make ownership transfer easier down the road.
Think about who you want to protect upon your death and make a list of your loved ones that you want to consider in your plan, including your parents, spouse, children, and friends. If you want to protect and provide for children under 18, you will also need to name a trusted guardian for them in case both parents pass away.
4. Trusts
You cannot name beneficiaries for larger assets such as a home or a car. In these cases, you can establish a revocable trust. A trust is a legal document, in which the trustee is the person who controls the trust assets, and the named beneficiaries, also called living or backup trustees, are persons who will receive the trust assets upon the trust owner’s death. Technically you are transferring the ownership of assets to the trust itself, hence, the transition of ownership between trustees becomes smooth and easy. A revocable trust will then allow for the asset to be transferred to living trustees without having to go through the probate process.
An irrevocable trust, on the other hand, gives you the option to give up control over your assets but it will also protect your assets, as creditors will not be able to access your money or property listed in an irrevocable trust. In an irrevocable trust, you cannot access the trust assets directly, nor can you make changes to the trust unless all the trustees approve the amendment, which is a long and complicated process in itself.
As we cannot foresee the end of our lives, there is no reason to wait for estate planning. It not only helps you prepare protection for your loved ones after your death but also helps them avoid any disputes over your property. It may not be easy to determine your estate plan right away, but it will certainly make things easier for everyone later on in the event of your unfortunate passing.
