Estate planning is a dynamic process that should not only be thought of in hindsight following a possibly life-threatening health condition or death of a loved one. It should begin immediately and continue throughout your lifetime.
Individuals should set in motion arrangements for the future of their assets and employ an array of strategies to ensure that those assets go to the intended parties and that their survivors are supported financially.
Transfer of assets
There are multiple vehicles available for distributing your property following the end of your life.
If you die “intestate”- without leaving a Will – state law will determine how your property will be distributed and while officials often attempt to do this fairly, it may not satisfy your intentions and may be a lengthy and cumbersome process for your loved ones.
A Will names recipients and an executor of your estate. It is a legal document prepared under state law to ensure there are no ambiguities about your wishes. Following your death, a court-supervised distribution of your assets – known as probate – will occur unless your estate planning documents and beneficiary designations are constructed so that all of your property is distributed without need of probate. This can reduce costs and allow for a more timely and confidential settlement of your estate.
Trusts may be used for transferring some of your assets. An individual or corporate entity is named as the trustee, who is responsible for managing the assets transferred to the trust for your benefit or for your designated trust beneficiaries. There are various types of trusts, each with their own advantages and uses.
Many people own assets as join tenants with rights of survivorship. As such, ownership will automatically transfer to the surviving owner under operation of law.
In the case of certain assets like qualified retirement plans and life insurance policies, you will name beneficiaries to receive your account balance and policy death benefits.
Caring for survivors
Estate planning should take into account your survivors, including your spouse, children and other dependents.
Some of your assets may require gradual liquidity, such as funds distributed to minor children. Guardians should be designated to care for any children who may be under 18 years of age in the event that both you and your spouse die prematurely. Life insurance can also be used as a means of establishing an estate to support for your family.
Minimizing transfer costs
Effective estate planning incorporates measures to minimize taxes and legal costs to distribute as much as possible for your heirs.
Trusts can be used to avoid the expenses associated with probate. Strategies such as charitable giving, bypass trusts, marital deduction and lifetime gifts can all be employed to limit estate taxes.
Once measures are put in place for the transfer of your assets, you should review your estate planning documents and beneficiary designations annually to make any needed changes.
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