It’s not a topic that most of us want to spend a lot of time thinking about, but failing to set up your estate properly for your heirs can cost them a lot of money and cause complications when you pass. Something as simple as not having a will can cause the court system to decide who gets your assets (your car, your house, your bank account) when you die. Is that really what you’d like to happen? Spending just a little time now can make sure that your wishes are honored after your death as well as minimize the federal and state taxes due on the value of your estate.
Estate planning 101
Estate planning for most people involves a combination of these documents.
- Wills: A will is a simple document that states who you want to inherit your assets at your death and names an executor (someone to handle your end-of-life arrangements and the distribution of your assets). Wills can be very specific, with dozens of people named, or very simple, leaving all of your assets to a single person or entity. You can also use a will to name a guardian for your dependent children, so that they will be raised by someone you, and not the court, choose.
- Trusts: A trust is similar to a will in that it is a legal document that states who gets your assets after your death. Unlike a will, a trust names a third party (a trustee) to oversee the distribution of these assets. Trusts come in a variety of forms and are mostly exempt from the probate process. In some cases, you can begin transferring assets to a trust while you are still living. Trusts are also useful for young children and/or for family members whom you feel need guidance on how to spend the money you leave them when you’re gone, since the trustee needs to approve all expenditures not outlined in the basic trust document.
- Life insurance: While not part of your estate, life insurance is an essential part of any estate planning process. If you have people who depend on your income to pay the bills or maintain a certain comfortable lifestyle, such as a wife or children, life insurance can give them the funds they need to do this after you are gone. Life insurance proceeds are payable directly to the beneficiary you name and are not subject to the probate (court) process.
- Quit claim deeds: In most states, you can transfer real property (houses and land) via a quit claim deed and avoid these items being included in the value of your estate. This legal document transfers the property at your death to the person named. There is a maximum value that can be transferred this way in most states.
To learn more about how you can minimize the stress for your family when you pass and maximize your estate, contact Ninfo Pemberton and Associates at 770-784-8000 to schedule an estate review.