A Guide to Estate Planning
Also, consider the tax implications of your assets. Beneficiaries might face expensive taxes, court fees, or legal costs following your death. Reviewing this ahead of time with an estate planner can help minimize these costs.
Depending on your assets, the associated fees can be high. A goods and services tax, for example, which often skips generations, can be as high as 40%. Considering tax and legal implications ahead of time allows you to maximize the assets you leave behind.
Assigning a Directive During Estate Planning
Assigning directives or roles is important when estate planning. Directives to consider include:
What Is Power of Attorney?
A power of attorney is a document you can sign to permit someone to manage your assets in the event you cannot. One of the most common questions we get is, “how does a power of attorney work?” In short, a power of attorney allows someone to act on your behalf in legal and financial situations.
A limited power of attorney assigns a temporary power of attorney over your assets. It has limitations and outlines what the assignee can and can’t do.
What Is a Health Care Proxy?
A health care proxy is another type of directive that names a person to make health care decisions on your behalf. A health care proxy is sometimes referred to as a durable power of attorney and is often included in an advanced directive.
A health care proxy is tasked with taking ownership of belongings left at the hospital and authorizing any necessary medical procedures.
Living Wills and Probate
Unless you create a living trust, your assets might go through probate. It’s important to consider what probate means and how it might affect the distribution of your assets.
What Is Probate?
Probate is a process in which an executor oversees the distribution of a person’s will and assets upon their death. This legal process involves reviewing assets and estate information. In most cases, a probate court also reviews the transfer of assets.
Creating a will allows you to manage your assets and distribute them as you see fair. Without a revocable trust, however, probate law means the court also gets to rule. Many people prefer to create a revocable living trust, as it allows beneficiaries to avoid probate.
What Does it Mean When a Will Is in Probate?
To probate a will means it must go through a court-supervised legal proceeding. During probate, the court will review the authenticity and validity of the will. The court will distribute assets to each beneficiary and make rulings about disagreements. A will might stay in probate for a couple of months to a few years, depending on the number and value of assets.
What Is Probate in Real Estate?
The probate definition when it comes to real estate is a legal process that allows a living will to transfer ownership of property to another person. Probate essentially means to prove. Real estate is one of the most common assets included when estate planning. A living will lists who receives your real estate assets. However, your real estate assets must still go through probate. Some states require multiple probate sessions for the transfer of real estate.
What Is a Living Trust?
A living trust is a fiduciary agreement that allows you to give instructions on how to disperse your assets upon death. Living trusts are most commonly used in the form of a revocable agreement that allows the family to skip probate.
What Is a Living Revocable Trust?
A trust is a legal directive that assigns your assets to a loved one while you’re still alive. This might be necessary when you’re incapacitated or unable to make decisions, which then allows your designated person to take over without having to go through the probate process. An irrevocable trust is similar to a revocable living trust, except it can’t be changed.
Who Needs Estate Planning?
Everyone needs estate planning. While older individuals or those close to retirement might want to think about estate planning sooner, it’s never too early to plan and protect your loved ones.
A common misconception is people with limited income don’t need estate planning. These families, however, stand to benefit most from a lost loved one’s assets. If you don’t create a living will or a living trust and you become incapable of managing your own assets, the state might assign a conservatorship or guardianship on your behalf. Upon your death, the state will disperse your assets based on its intestacy laws.
Estate planning is a necessary part of life, regardless of your age or wealth. Are you ready to protect your assets and loved ones?