Estate Planning Facts: 6 Reasons to Have an Estate Plan
To start with your estate planning, you need to weigh some important decisions. You should know your assets, property, and what you want to do with it. Taking stock of your possessions requires energy, time, and legal knowledge.
Choose a Trustee
Determining who should be your trustee depends on what type of trust you choose. An irrevocable trust should have a trustee who is someone other than yourself, maybe a friend or family member, while for a revocable trust, you can be the trustee. If you are the trustee for your trust, then you should determine who will succeed you if you become incapacitated.
Mind the Children
When you set up a trust, your underage children should be considered. Children with special needs also require more consideration for property distribution. The government offers benefits to individuals with special needs who meet certain requirements. You should consider how to best provide for your children so they can continue to receive government benefits as well.
Do It Right
When you try to cut corners or hurry through creating important estate planning documents, you can miss meeting important standards. Those requirements help ensure the legality of your documents. One way to legalize a will or an estate planning document is to sign the paperwork in front of a notary public. However, be sure to work with a lawyer to make sure that your paperwork fits the law.
Fund the Trust
After a trust is set up, you must transfer your assets to the trust so that the trust will be able to work as you desire. Many trusts fail because the creator of the trust didn’t fully fund that trust. Working with an estate planning lawyer can help ensure that you don’t miss any crucial steps to setting up your trust.
Consult a Lawyer
You want your trust to serve you, to meet your needs, and be flexible with your life style. A document downloaded from online might cover the basics but could never begin to handle what you want in a trust. The last thing you want to do is try to create a trust yourself and not have it hold up under law. An estate planning lawyer is an expert on the law and can draft a trust that fits your plans.
Estate Planning Facts: 6 Reasons to Have an Estate Plan
Many people believe that estate plans are only for the rich or to avoid taxes. But estate planning can help you care for your family after death or provide for your favorite charities. An estate plan also ensures that your money and assets go exactly where you want them to go.
1. Avoid Some Estate Taxes
When an individual dies, the government requires an estate tax on what you were worth. Sometimes you can be exempted from taxes for various reasons. For the most part, estate taxes are only brought against people who are worth more than a million at death. Having an estate plan is good for more reasons than just avoiding taxes.
2. State Take Over
Without an estate plan in place, your state takes over your assets and determines what should be done with them. Your hard-earned possessions and savings will be given away as the state sees fit. If you want to control what happens to your property, then you need to create an estate plan.
3. Provide for Children
Sudden death could mean that your child or children has no named guardian. Without a guardian already chosen, the government will receive the responsibility of choosing someone to care for your child. You need to draft a will that names who will care for your children if something happens to you.
4. Caution: Creditors
Children who inherit property can sometimes lose the inheritance to their creditors since the property is treated like your child’s earnings or property. If your child has outstanding debt, a divorce, or a lawsuit, their inheritance may be used for those things. To help protect your child’s inheritance from creditors, lawsuits, or divorce, place the inheritance into a trust for your children.
5. Inheritance for Non-Traditional Families
The government follows the traditional family pattern when distributing property on behalf of a deceased individual who did not create an estate plan. You want to choose who receives your assets. Otherwise, the government may give your assets to your next blood relative that you no longer consider family.
6. Give to Your Favorite Non-Profits
If your assets fall into the hands of the government, your hope to give some of your assets to a non-profit organization goes out the window. The only way to give to a charity after your death is to create an estate plan that legally sets aside your assets for that specific non-profit. In some cases, you may be eligible for tax breaks as well.
3 Estate Planning Rules of Thumb
Don’t Do It Yourself
Estate Planning is a Process
Start Sooner than Later
Estate planning is an overwhelming process, but you don’t need to do it alone. In fact, you don’t want to do it alone. Moreover, an estate plan should be a process and not done in an hour. And the process is much improved by being done before there’s a crisis.
Questions and Answers about Estate Planning
What Happens Without an Estate Plan?
When someone dies without creating an estate plan, all that person’s property and assets falls into the hand of the state’s probate court. The court takes steps to analyze the situation and the will, if there is one, and decides on how the possessions should be distributed, whether to heirs or creditors.
Can Probate Court be Avoided?
A few options are available to you to avoid having all of your assets be managed by the probate process. For example, choosing a beneficiary of certain assets like a life insurance policy or tax-deferred account can ensure these avoid probate. Meanwhile, your real estate or bank account cannot have a beneficiary, but a will provides guidance to the probate court.
The best way to avoid probate court completely is to set up a revocable trust. All ownership of your assets are transferred to that trust, and your wishes are listed in the trust for when you become incapacitated or die.
Can My Entire Estate Go to my Spouse?
If everything you own belongs to both you and your spouse, you can avoid probate. However, if your assets exceed the estate tax exemption, then you’ll have to deal with estate taxes. To help avoid estate taxes, you can set up two revocable trusts, one for you and one for your spouse.
Married couples can also choose to retitle the home to be owned by “tenants by the entirety.” This means that if one spouse dies, the home passes immediately to the remaining spouse. This avoids probate and offers some creditor protection as well.
How Does the Age of My Children Influence my Estate Plan?
With children involved, your estate plan will need to be adjusted after every major life event. Whether the family changes with birth, death, marriage, or divorce, you’ll want to update your documents to ensure that they reflect your wishes. Moreover, as your children age, you may decide that they are wise enough to fully inherit rather than only receiving partial inheritance over a number of years.