When we think about the future, we can never be too prepared. From investing in our retirement to purchasing insurance policies for our assets, our daily decisions influence our future for better or worse. But how do you secure your family’s future in the event of your death? Few people like to think about their demise but it’s important to get your affairs straightened out in order to ensure that your family is cared for and your assets are distributed the way you intend them to be.
There are two legal instruments that are used for the protection of your assets and ensuring that your family is cared for: wills and trusts. A trust is simply a way of having a separate legal entity which offers your property and your assets protection from taxes, probate and public scrutiny. Trusts can be established either when you are living or upon your death if it specified in your will. The type of trust you create will determine the level of control you have over the property that you place within. An experienced attorney will know what type of trust is best for your property and assets and will help you establish one.
A will is a legal document that allows a person to name a guardian for your children and it specifies who will inherit your property when you die. Without a will you won’t have any decision about what happens to your property. Consult a will and trusts lawyer to help you draft a will that has the necessary foresight and detail that a will requires.
Even if you have a will, your estate will still go through probate. This is the legal process an estate passes through to ensure that property and assets are distributed according to will. When there is no will present, the probate commences according to state laws. This process takes around a year to complete. The reason for such a long wait is that the validity of the will must be established, all heirs, creditors and anyone else that has a stake in the deceased’s property must be informed of the person’s death and if there are any disputes over the will, they must be resolved in probate court.
Establishing a trust or writing a will that is valid and is disbursed without delay is important so make sure that you use the services of an experienced trust and wills attorney.
Things to know
Of course, even many people think that estate planning is a good idea, few, if ever, get to actually do anything about it. Wills and trusts are usually at the end of to-do lists for most people. However, getting things clear and writing will save your family from unnecessary anxiety in the event that you pass away and the issue of dividing your assets comes up.
You don’t have to do it all – taking just a couple of the steps below will ensure that the people you care about will receive your assets the way you intend, without any headaches or loss of money.
- There is no excuse for not having a will. Writing a will is easy. You can do it on your own using a good how-to book or even computer software. All you need to do is write down the persons and the assets they will inherit and then sign the will in front of a witness. That’s it. No need to file it anywhere; just put it in a safe place.
- Account for everything. A majority of your property – retirement accounts, jointly owned real estate, life insurance proceeds and even cars – usually do not pass through a will. Think about who you want to inherit it.
- Retirement plans. The law states that your spouse automatically inherits your 401(k) plan upon your death. This can also be given away in writing.
- Your assets – your call. Although people usually leave everything to their children, it doesn’t mean that you have to do the same. Just make sure that you list them in your will so that everybody is accounted for.
- Tax myth. A common misconception people have is that they have to pay income tax on money they inherit; that is false.
- Federal estate tax. The only time that you will have to worry about paying taxes on inherited assets is if you have more than $5.34 million in your estate. In this case it would be best to hire an attorney to make sure that everything is accounted for.
- Being specific helps. You can save your family many fruitless arguments if you specify whom should receive any items with special sentimental value you might have. It’s not uncommon for people to fight over seemingly useless items – so why not clear it up now?
- Business. Own a business? You’ll have to specify what happens to it after you’re gone.
- Complex vs simple. A simple will is sufficient as it will cover most bases. In other cases, if your family is older or ill, a living trust may be more beneficial. A living trust allows a family to skip probate court.
- Keep your files in a known & safe place. This may seem obvious, but none of your estate planning documents will be of any value if your family doesn’t have access to them in the first place.