You’ve worked hard to grow a family, build your career, and establish a legacy. Now it’s time to think about how you can pass those assets on to your loved ones after you pass away. While it may not be pleasant to think about your own death, estate planning is critical to protecting your family and your legacy.
Without an effective estate plan in place, there are any number of issues that can erode your estate and negatively impact your legacy. One of those issues is probate, which is the legal process for settling an estate. It usually involves tasks like filing a tax return, paying debts, liquidating assets, and identifying heirs. It can generate a substantial amount of legal and administrative costs paid directly from your estate.
The good news is that there are ways to minimize the impact of probate. With careful planning, you can utilize tools that either reduce probate exposure or that bypass probate completely. Below are four strategies commonly used to reduce probate expenses:
Finally, one effective way to minimize probate exposure is to remove assets from your estate before you pass away. If the asset isn’t in your estate, then it won’t be exposed to probate. You can do this by gifting assets to your loved ones while you are still alive.
An additional benefit to this strategy is that you get to see how your legacy impacts your loved ones’ lives. Of course, you don’t want to give away too much. It’s important to keep a reserve to pay for long-term care or other emergency costs that may arise. A financial professional can help you develop a gifting plan.
Assets and accounts that have beneficiary designations aren’t covered under a will and also don’t go through probate. Instead, you beneficiaries fill out claim forms with the account administrators, who then issue payment of the benefit.
There are a variety of assets and accounts that use beneficiary designations, including IRAs, 401(k) plans, life insurance, annuities, and more. If you can maximize your use of these types of assets, you may be able to reduce the impact of probate costs.
You may have a will, but a will alone won’t keep your assets out of probate. A trust, however, will. Trusts have beneficiary designations, which means assets that are owned by the trust don’t go through probate. To utilize this strategy, you simply establish a trust, name your beneficiaries, and then retitle assets so they are owned by the trust. There are many different types of trusts so you may want to consult with a financial professional before taking action.
If you have a specific account or asset that you want to bypass probate, you may want to consider adding a joint owner to the title. When you pass away, the asset simply transfers to the joint owner without going through the probate process. Be aware, though, that the joint owner may get full authority as soon as you add them to the title, so be sure that you trust the individual before adding them.
Are you ready to prepare your estate for probate? Let’s talk about it. Contact us at Carstens Financial Group. We can help you analyze your needs and goals and create a strategy. Let’s connect today.
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