What is estate planning?
Estate planning is the process of transferring property and assets from one generation to another. An “estate” is the total property and assets owned by an individual prior to distribution through a Will or Trust.
Many people assume that “estate planning” is only for the rich, but this is a big misconception. Estate planning is for everyone; there are no minimum asset requirements.
Why should I do my estate planning now?
Most people put off estate planning because it involves more than listing what assets are owned and who is to receive those assets when someone dies. Estate planning involves attitudes and feelings about death, property ownership, business arrangements, and marriage and family relationships. If a plan is not made, state law will decide what happens to the estate, regardless of what the deceased may have intended.
What is probate?
Probate is the legal process to determine who should receive a person's property and assets at death. It is the only way to legally change the title of property when the owner has passed away. Probate operates according to state law and can be a complicated and expensive process. The AARP estimates that the average probate cost is 3-8% of a person’s estate and lasts about nine months to two years.
Who will act as guardian for my minor children?
If you have any children under the age of 18, there are some essential questions that need to be asked. For example: Who will raise the children if both parents pass away? Who will manage any cash or assets the children might inherit? At what age will the children inherit?
By doing nothing, the state will decide these questions for you and the answers may be very different from what you or your spouse want.
What will happen to my home?
If an individual
owns property (either outright or mortgaged) and passes away without any estate planning, the property must go through probate before it can be distributed to heirs.
What is a Last Will and Testament?
A Last Will and Testament is a document that describes how the person who made the Will wants assets distributed after their death. By making a Will, the person can decide who will receive their assets, how much they will receive, and when they receive it. A Will allows the person to choose their personal representative/executor and appoint a guardian for any minor children.
Does a Will avoid probate?
It depends on the asset! If the asset in question is real property, the answer is NO. When a couple
owns property (either outright or mortgaged) as joint tenants and one of the spouses passes away, then the surviving spouse will have complete and immediate ownership of the property without probate. This is called “Joint Tenancy with Full Rights of Survivorship.” When the surviving spouse passes away or if the couple passes away at the same time, the property must go through probate before it can be distributed...even if they have a Will! Remember, a Will takes effect after death.
What is a revocable living trust?
A Revocable Living Trust is a legal document or “Living Entity” that allows an individual or couple to transfer ownership of real property and/or assets (such as a home, real estate, bank accounts, certificates of deposit, securities, life insurance, stocks, bonds, etc.) from personal ownership into the legal ownership of the trust. A trust allows the trustors/grantors (the individual or couple setting up the trust) to decide who will receive their assets, how much they will receive, and when they receive it. A trust allows the trustors/grantors to choose their successor trustees, who their beneficiaries are and appoint guardians for any minor children.
If a Revocable Living Trust is set up correctly and all of the property and assets are properly transferred to the trust it will provide the following benefits: Avoid probate entirely; distribute property and assets to the beneficiaries almost immediately; ensure any minor or disabled children are cared for; handle financial affairs if someone becomes incompetent; and save money in federal estate tax and capital gains taxes.