People are often unaware of the benefits of preparing Wills. Many believe they only need a last will and testament if they own valuable assets they want to pass along to heirs upon their death.
Individuals who procrastinate about preparing Wills may very well leave a mess for their family members to take care of. Instead of choosing an estate administrator and beneficiaries to receive inheritance gifts, the estate will be supervised by a probate judge because no directives were provided.
Probate is necessary for documenting a person’s death and settling their estate. If a person executes a last will and testament their property can be gifted to whomever they desire through a process known as testate probate. Without a Will, estates are settled in accordance with state laws using a process known as intestate probate.
The probate process is quite extensive and generally lasts several months. Assets cannot be transferred to beneficiaries until the estate is fully reconciled. During this time, property values can depreciate, but recipients are required to pay inheritance tax based on the date of death value.
Furthermore, if decedents did not engage in estate planning to cover settlement costs, administrators may have to sell assets to pay off outstanding debts, court fees and legal services.
Preparing a Will does not allow the estate to avoid probate, but does provide directives about settlement proceedings, beneficiaries, personal representatives, and distribution of assets.
The only way to ensure heirs receive inheritance property without delay is to setup a revocable trust. Since property held in trusts is no longer owned by individuals it is not considered as part of their estate. Trust property is exempt from probate and can be transferred to beneficiaries in an expedient manner.
There are many types of trusts, but each requires a last Will to provide directives regarding property holdings. A Trustee is chosen to handle settlement proceedings and distribute assets to designated beneficiaries.
Certain items cannot be placed into trusts. Therefore, individuals ought to execute a “pour over” Will and designate beneficiaries to receive their property. Items included in pour over Wills include clothing, collectibles, household belongings, and property with sentimental value.
The most practical way to protect assets and pass along to future generations is to work with an estate planning law firm. Attorneys can offer guidance and help clients understand the benefits and drawbacks for each estate planning strategy.
Before consulting with attorneys it can be helpful to prepare a list of goals, along with any questions you might have. It can also be beneficial to address the following questions:
• What kind of assets do you own and what is the appraised value?
• Do you own real estate located in another state?
• Are you a business owner and will the company be handed down to a successor?
• Who will become the legal guardian of minor children?
• Do you want to establish a children’s trust fund?
• Who will receive your estate assets when you die?
• Do you have life insurance policies?
• If your estate has to pass through probate, have you setup a financial account to pay off outstanding debts and probate expenses?
While establishing a comprehensive estate plan can be time-consuming it is worth the effort to protect your family legacy. Those who have had to settle an intestate probate estate will attest it is a frustrating and complex process.
Instead of adding stress to loved ones during a difficult time, make the effort of putting together an estate plan and executing a last Will. Doing so will not only make things easier for those left behind, but can also reduce estate and inheritance tax liability for heirs.