You probably have unique goals for your legacy and estate. Perhaps you want to help your kids or grandchildren fund their own goals, such as retirement or college. Maybe you want to leave assets to a favorite charity or cause. Or maybe you simply want to provide a safety net and financial security for those who are most important to you.
Most people start their estate planning with the creation of a will. It’s the most basic and fundamental estate planning tool. Your will can provide instructions to your executor and the local court about who should receive your assets after you pass away.
A will can’t do everything, though. Even with a will in place, your estate will still go through probate, which is the legal process for settling one’s estate. During probate, your executor and the local probate court pay all outstanding debts, file a final tax return on your behalf, liquidate assets, notify heirs and much more.
Probate can be time-consuming, sometimes lasting months. It can also be costly, draining your estate of funds to pay for legal and administrative expenses. And it can greatly reduce the amount of assets that actually flow to your heirs.
Fortunately, there are steps you can take to reduce probate’s impact on your estate. Below are a few strategies to consider:
Use tools that have beneficiary designations.
Assets that have beneficiary designations aren’t governed by your will. That means they’re exempt from the probate process. Instead of looking to your will for guidance, those account administrators will simply distribute the assets to the individuals you have named as your beneficiaries.
Life insurance, annuities, IRAs, 401(k) plans and trusts are all examples of beneficiary-driven vehicles. You can minimize the amount of assets that pass through probate by increasing the amount of assets you hold in these types of accounts. For example, you might consider setting up a trust and then retitling assets to the trust so those assets can bypass probate.
Title assets under joint ownership.
Bank accounts, real estate, non-qualified investment accounts, and other assets may allow for joint ownership with another person. You simply retitle the asset to add the other individual as a joint owner. After you pass away, the asset passes directly to the joint owner.
Think carefully before you add a joint owner to an asset, though. In some cases, the joint owner may immediately gain full ownership rights, such as making withdrawals or investment changes. Be sure that you trust the individual with those responsibilities.
Give assets away.
You give assets away while you’re still alive rather than bequeathing them in your will. If the assets aren’t in your estate when you die, they’re unlikely to go through probate. However, it is possible for the probate court to look back and include some assets given away shortly before your death.
You could give your grandchildren money for college while you’re still alive rather than as part of your will. Or you could give your children money to help fund their retirement. The other benefit of this strategy is that you get to see your legacy put to use while you’re still alive.
Ready to develop your probate strategy? Let’s talk about it. Contact us today at Carstens Financial Group. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
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