In this blog post we are going to provide some basic information to readers who don’t know where to begin when it comes to estate planning.
The Financial Component
Estate planning involves making preparations for the future transfer of your financial assets to your heirs. This can be done in a number of different ways. The best course of action will vary depending on the circumstances in question.
If you have a very simple situation you may want to consider the utilization of a last will.
Last Wills
Most people have heard of the last will or last will and testament. With this legal device you state your final wishes regarding the distribution of your property.
Traditionally, the testament portion was used to transfer personal property, and the will was used to transfer real property. At the present time, the last will is usually utilized to transfer both types of property.
Someone has to actually conduct the business of the estate. Because of this, you should select an estate administrator when you are drawing up your will. This person is called an executor or personal representative.
When you use a will to state your final wishes regarding the transfer of property that you owned personally when you died, the estate must be probated.
Probate is a legal process. It can be time-consuming and costly.
Revocable Living Trusts
Many people think that trusts are only utilized by people who are wealthy. Some types of trusts are used by high net worth individuals. However, there are other trusts that don’t really address the concerns of the wealthy. One of these is the revocable living trust.
When you convey assets into a revocable living trust you name a trustee to administer the assets after you die. You also name a beneficiary or beneficiaries who will receive distributions from the trust according to your wishes. You state these wishes in the trust agreement.
After your passing the trustee follows the instructions that you left behind. The trustee will distribute assets to the beneficiaries, and these distributions will take place outside of probate.
Estate Tax Efficiency & Asset Protection
The transfer of financial assets gets more complicated for people who have been able to accumulate a significant store of wealth. The federal estate tax can be a factor. There is a federal estate tax credit or exclusion that stands at $5.45 million in 2016. Anything that you transfer above this is potentially subject to the estate tax and its 40 percent maximum rate.
There are estate tax efficiency strategies that can be implemented to mitigate your estate tax exposure.
Asset protection can also be a concern for high net worth individuals. Estate planning can involve positioning assets safely so that they cannot be attached by creditors or claimants.
Incapacity Planning Component
Estate planning is not exclusively confined to financial matters. There is also the period of time that may precede your death to consider.
It is common for people who have reached an advanced age to go through a period of incapacity. In fact, around 45 percent of people who are at least 85 years of age have Alzheimer’s disease.
If you can’t make your own decisions, a guardian would be appointed by the court to act in your behalf. Most people would rather choose decision-makers on their own in advance.
This can be accomplished through the execution of legally binding documents called durable powers of attorney. Because they are in fact durable, they remain in effect even if the grantor or principal becomes incapacitated.
When you select your own financial and health care decision makers there is no need for the court to be petitioned to name a guardian to take over your affairs.
Attend one of Free Seminars to learn more and then Schedule a Free Legacy Planning Consultation
Estate planning is essential for all responsible, self-supporting adults. It can seem as though it is something that you can put off until a later date. However, people of all ages pass away every day.
Usually, when you plan ahead for the future, you will be the beneficiary of the advance planning. As a result, if you fail to plan ahead effectively, you and you alone will suffer the consequences.
On the other hand, estate planning is something that you engage in for the benefit of the people that you love. If you are remiss, your family members will be the ones who will be left behind to pay the price.
Action is required if you are unprepared from an estate planning perspective.
Our firm would be glad to help you in the planning of your legacy, to get started attend one of our free seminars.
