They say the only constants in life are death and taxes. And despite the consistency, we do our best to ignore both.
Instead of facing these unavoidable moments, most people leave a mess for grieving family and friends. Months, even years, can pass navigating legal hurdles, incurring unexpected costs, and grappling with the complexities of distributing assets.
This scenario, while unfortunate, can be mitigated with proper planning… estate planning.
According to plannedgiving.com, 68% of Americans do not have a valid will.1 Many have never created a will or considered how they want their assets distributed. Others may have outdated wills that no longer reflect their current family situation, including births, deaths, marriages, divorces, or changes in assets and income.
Probate is a lengthy, and sometimes costly and emotionally draining legal process for distributing a deceased person’s assets. While it can be difficult to avoid the legal system completely, there are strategies to minimize or even eliminate the need for probate. Here are some ways to proactively plan.
Estate Planning
“Getting your affairs in order” is not just something they say on soap operas or old Westerns. When it comes to avoiding a courtroom, proper paperwork is critical.
Last Will and Testament: Even with estate planning strategies to minimize probate, a will is essential. It provides instructions for assets not covered by other arrangements, appoints a guardian for minor children, and expresses your final wishes.
Durable Power of Attorney: This document authorizes someone you trust to manage your financial affairs if you become incapacitated.
Healthcare Directive (Living Will): This document outlines your wishes regarding medical treatment in case you are unable to communicate them.
Trusts
A trust is a legal arrangement where a person (the grantor) gives another person or entity (the trustee) the right to hold and manage assets for the benefit of a third party (the beneficiary). Examples of trusts include:
Revocable Living Trusts allow you to maintain control over your assets during your lifetime while providing for their smooth transfer upon your passing. It can help your family avoid probate court, reduce the time and cost of estate administration, offer privacy, and allow for flexible distribution of assets.
Irrevocable Trusts offer more significant estate tax benefits and creditor protection, but you typically relinquish control over the assets placed in the trust.
Beneficiary Designations
A beneficiary designation is the process of naming a person or entity to receive the benefits from your financial products, such as life insurance policies, retirement accounts, and bank accounts when you pass.
Life Insurance: Designate beneficiaries on your life insurance policy so the death benefit can be paid directly to beneficiaries, bypassing probate.
Retirement Accounts: Designate beneficiaries for your 401(k), IRA, and other retirement accounts for a smoother and quicker distribution of these assets.
Payable-on-Death Accounts: For bank accounts and other financial assets, consider designating a POD beneficiary. This allows the assets to transfer directly to the beneficiary upon your death.
Joint Ownership
Joint ownership is a legal arrangement where two or more individuals share title to a property or asset.
Joint Tenancy with Right of Survivorship: When one owner dies, their ownership interest automatically transfers to the surviving owner or owners. This simplifies ownership of property and avoids probate for that asset.
The power of a team. We’re here to help!
We’ll collaborate with your estate planning attorney to create a comprehensive estate plan tailored to your needs and circumstances. If you do not have an attorney, we’re happy to make an introduction.
By implementing these strategies, you can significantly reduce the burden of probate on your loved ones and ensure a smoother transition of your assets. Remember, proactive estate planning is a gift you give not only to yourself but also to those you care about most.
What worries you about probate or estate planning?
Simply reply to this email and let us know. We can schedule some time to discuss what’s on your mind and explore the most effective strategies for your situation.