Protecting Your Assets Through Estate Planning

No one likes to think about the time after they’re gone, but you might leave your family in a sticky situation if you neglect this kind of planning. Learn about protecting your assets through estate planning so you can distribute your hard-earned assets as you wish.

Key Takeaways

  • If you don’t have a will, it can take much longer for a probate court to divide up your assets.
  • Appointing beneficiaries and creating transfer-on-death deeds can help you with your estate planning.
  • Gifting some of your assets during your lifetime can help you distribute some of your wealth before you pass away.

What Happens if You Don’t Make a Plan

If you don’t make a plan for your assets after you pass away, they may not get distributed how you’d like them to. Without a will, your assets will go to a probate court. Here, strangers will decide who inherits your money, properties, jewelry, and other assets.

Not only will the division of your assets not go according to your desires, but your family members will also have to wait much longer for the complete resolution of your estate. A probate court may take several months depending on the case, so you can save your family members and friends the anticipation by detailing your wishes in a will.

If the thought of estate planning overwhelms you, you’re not alone. It seems to have that effect on many American adults, as only 46% had a will in 2021. In prior years, around the same percentage of adults have been able to say they have a will, with the highest being 51% in 2005.

Whether the reason around half of the adult population doesn’t have a will is that they don’t want to take on the seemingly arduous process or they don’t believe they’re passing away anytime soon, it’s important to not be a part of the group without wills. Things can happen, and it’s better to be prepared than to make your family go through a lengthy probate process.

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Appoint Beneficiaries and Inform Your Loved Ones

As you start estate planning to protect your assets, you can inform your loved ones of your intentions. While what you say can help them better understand your intentions, your spoken word alone won’t guarantee the division of your assets as you define them. You can prevent complications by appointing beneficiaries for your assets. If you have dozens of assets, you can designate different beneficiaries depending on how you want to divide everything up.

Some people may appoint beneficiaries with the help of an estate lawyer, but others may prefer to do it themselves online. If you have a brokerage account or another account for managing your assets, you can likely log into your account and make changes to your beneficiaries from the comfort of your home. You may have to answer a few security questions or log in with multifactor authentication so your asset provider knows that it’s you who’s making the desired changes.

It’s important to review your beneficiaries periodically. You may choose to do so every six months, every year, or whatever time frame works best for you. Ensure that your wishes remain relevant. If you experience the birth of a new child or the introduction of a new friend who you’d like to receive some of your assets after your passing, you can change your beneficiary allocation as necessary.

Use Transfer-on-Death Deeds if Applicable

Determine if your state allows for the use of transfer-on-death (TOD) deeds. As of January 2022, 29 states approve their use, and more states are expected to join this group in the next several years. A TOD deed allows you to transfer your assets to your loved ones after you pass away. It’s different from having a life estate and designating a beneficiary, as a TOD allows you to keep full ownership of your assets until your death.

After your death, your loved ones become the new asset owners, and they don’t have to go to court. Some people choose to use TOD deeds because if you use the alternative of a life estate and beneficiary, the beneficiary will have some interest in the assets during your lifetime.

Protecting Your Assets Through Estate Planning

Consider Appointing a Trustee

Even if you take the time to outline who you want to receive your assets, you may not trust your loved ones to do them justice. Some grantors may think their loved ones have problems managing their money. If you want to transfer your assets to younger individuals or other loved ones who have questionable spending habits, you can appoint a trustee.

A trustee is a third party who manages your assets on your beneficiaries’ behalf. Choose a reputable trustee who will transfer your assets as they deem appropriate. They may follow a schedule to help ensure the beneficiaries’ financial stability. This can prevent the beneficiary from spending all of a grantor’s money at once.

One benefit of using a trustee is that when you put your funds in a trust, they aren’t subject to estate taxes. However, moving your funds to a trust can be a lengthy process, especially if you have multiple types of asset. Some people may dislike the idea of a trust since the trustee holds administrative control of the assets in it, but it can be a beneficial aspect of your estate planning.

Gift Some of Your Assets While You’re Alive

According to the Internal Revenue Service (IRS), you can give one person up to $17,000 a year without having to pay taxes on it. This figure is the new maximum for 2023. In prior years, it was between $13,000 and $16,000. The new 2023 amount has been adjusted for inflation.

You can give a gift that’s $17,000 or under to as many people as you’d like without having to pay taxes on each sum of money. For example, you can give a $17,000 gift to two children, two grandchildren, and two friends tax-free as long as the sum of each individual gift doesn’t exceed the established threshold.

Get Professional Assistance

If you don’t work in the world of financial and estate planning, figuring out your own way around can feel like a burdensome task. You can take steps to protect your assets by contacting our team at Anderson Advisors. Once we help you settle the details of your estate planning, we can also assist you with other relevant financial matters, including tax planning and retirement planning.

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