All You Need to Know About Estate Planning
Believe it or not, nearly everyone has an estate, regardless of your age. Your estate is comprised of everything you own—which includes your home, car, other real estate, checking and savings accounts, retirement plans, 401K’s, furniture, personal possessions, life insurance, investments.
No matter the size, large or modest, everyone has an estate and one thing in common, you can’t take it with you when you die.
Estate planning is an important step you should take to ensure that your health care and property wishes are honored. It also ensures your loved ones have been catered for in your absence. Many people overlook this measure in favor of other immediate concerns. An estate plan can help you avoid a series of legal queries that are likely to arise in the event of your demise. Some of these legal queries include: the state of your financial affairs, your personal and real property, who gets what, and whether a personal guardian will have to be appointed to take care of minor children. Here is a brief look at the basics of estate planning.
What is the Meaning of an Estate?
An estate is all the property you own by the time of your demise, including:
- Personal property like jewelry, artwork, and automobiles
- Life insurance policies
- Bank accounts
- Stocks and securities
- Real estate
- Retirement accounts (in some cases)
What is the Importance of an Estate Plan?
It does not matter how old you are or the complexity or size of your estate, estate planning helps you:
- Identify members of your family or other loved ones whom you wish to benefit from your property after you pass on
- Ensure your property is transferred to the people whom you have identified without any legal hurdles
- Reduces the amount of tax you will be required to pay so you can pass your property to your beneficiaries upon your demise
- Reduces the amount of time and expenses linked with the probate process through the use of estate plan devices such as living trusts and bank accounts that are payable on death
- Indicates the type of life prolonging medical attention you wish to get should you not be able to express those wishes when the time comes
- Expresses the funeral arrangements you wish to have and how the related expenses will be paid
What Considerations Should You Make Before Making an Estate Plan?
The Arrival of Children
One of the things that make an estate plan necessary is the birth of a child. If you give birth to your first child, you need to ask yourself how the child will survive should you and your spouse pass on. Wills or a standby guardian appointment offer you the chance to name a guardian who will care for your child if anything were to go wrong with you and your spouse. Apart from assigning a guardian to be responsible for your care and custody, you also need a conservator to manage the assets that the minor child is to inherit.
In some cases, a trust may be more suitable than wills. Trusts are used for assets such as retirement assets, life insurance, financial assets, and real estate. These assets are handled within a trust for the sole benefit of a minor or other beneficiary. A trust that is professionally managed may produce better results compared to an account that is entrusted to guardian who has no knowledge or experience in investing and protecting assets.
If you have a business, you should think about the best way to pass the ownership of your business in the event of your demise. If you are considering keeping the business to your family, you need to create a plan that makes it easy for the business assets to be transferred to your family members. You can to do this through making provisions for a family limited liability company or a family limited partnership.
The Size of Your Estate and The State Where Your Estate is Situated?
You need to consider the size of your estate when drafting an estate plan. One of the most important considerations is whether the value of your estate is more than the estate and gift tax exemption. There is limit that an individual or couple’s estate should not surpass to qualify for estate tax exemption. You should consult an attorney to determine what that limit is. In the event of your demise, the tax exemption can be taken on by your surviving spouse. You should also make provisions to address what happens in case of a simultaneous death.
Probate and Privacy
One of the main reasons you should have an estate plan is to avoid or minimize the probate process and its associated expenses and delays. The probate process also brings about the loss of privacy. Some of the concerns associated with probate include:
- Expense: Probate fees are substantial even where there is no conflict. The fees paid to an attorney and court costs may diminish your estate’s value
- Delays: On average, probate can last for up to a year. With proper planning, you can avoid costs, loss of privacy, and delays.
- Loss of Privacy: When your estate is subjected to probate, anyone can get access to certain information through the probate court. For example, creditors may access probate records and seek to collect.
Having an estate plan is important at various stages in your life. There is no specific age at which you should start the process. New parents may want to think about their child’s wellbeing and plan accordingly. As your children grow, your financial conditions become complex and your needs and assets change. In this case, your past estate plan needs to be adjusted to ensure it addresses your current needs and future needs that can be anticipated.
You could choose to name your favorite trust or charity as the primary or residuary beneficiary of your estate. For instance, you could designate a certain percentage of your assets to a charity. If you intend to establish a steady income stream for a charity during your lifetime, you may use a charitable lead trust or CLT. When the CLT is terminated, the balance goes to your beneficiaries.
A charitable remainder trust or CRT gives your beneficiaries a constant income stream for a set period of time. When the CRT is terminated, the balance goes to your favorite charity. The benefits of both of these trusts include:
- Reducing estate taxes
- Giving to your beneficiaries
- Giving to charities
- Claiming tax deductions for philanthropic giving
- Eliminating or reducing capital gains tax on appreciated assets
An Estate Planning lawyer will help you review all of these options and choose the one that is best suited for you.
The most common circumstances that affect decisions for estate plans are concerns about disabilities and blended families. There are special trusts set up for a disabled beneficiary. These trusts are structured in a manner that enables the beneficiary to continue getting public assistance. For example, they may continue to be entitled to social security disability insurance. An estate planning attorney can help you establish whether your trust will meet a specific situation.
Blended families complicate the process of making estate plans. For example, you may wish to leave your biological children with a different inheritance than your step-children. On the other hand, you may wish to protect your biological family’s inheritance in case your spouse remarries. With a solid estate plan, you will be able to address these and other complex issues.
While many people consider estate plans to be for the wealthy, this is a myth that should be disregarded. Regardless of the size of your estate or your status in society, making a plan for your estate is a smart move to ensure that your property passes smoothly without any legal hurdles.
The caring, compassionate, and experienced attorneys at Yoder & Jessup P.C. are also prepared to assist you in acting as the personal representative (also known as an “executor”) in administering an estate through probate. Dealing with the loss of a loved one is difficult enough without also bearing the responsibility of administering that loved one’s estate. Let our attorneys ease that burden by guiding you through the process and ensuring that the wishes of your loved one are fulfilled
Serving the counties of Noble, DeKalb, Steuben, LaGrange, and the surrounding area, our experienced and skilled attorneys can help protect your assets and ease the burden on you and your loved ones.