An estate plan is an important part of any financial strategy, as it can protect your heirs and assets from a number of significant threats. Your estate plan addresses your assets and how they should be distributed after you pass away. You can also use it to minimize taxes and a wide range of other potential costs.
One of the biggest costs your estate may face is probate. Probate is the legal process for settling one’s estate. The process is managed by your estate executor and the local probate court. It usually consists of a variety of tasks, including notifying potential heirs, paying debts, liquidating assets and more.
As you might expect, probate can take weeks or even months. During that time, your estate may rack up costs for lawyers, accountants, real estate fees and more. It can also delay the distribution of your assets, as that may not happen until probate is complete.
Fortunately, there are steps you can take to eliminate the impact of probate on your estate. Below are three such steps. If you haven’t planned for probate, now may be the time to do so. These steps could ease the process for your heirs after you pass away.
Gift assets to loved ones while you’re alive.
You can minimize the impact of probate by simply reducing the amount of assets in your estate. The fewer assets you have when you die, the fewer that have to go through probate. One way to do this is by gifting assets to heirs and loved ones while you’re still alive. Be careful, though. Many states have laws about how long an asset must be out of your estate for it not to be included in probate.
There are also gift tax and income tax laws that apply to gifting. You’ll likely want to consult with a financial professional to see how those laws apply to your strategy. Finally, be sure to consider how your loved ones may feel about the gifts. Some may feel that they’re not fair. If the gifts will create conflict, you may want to consider an alternate plan.
Use a trust to manage and distribute your assets.
A trust is another effective strategy for minimizing the impact of probate. A trust is a legal document that’s used to manage investments, savings, property and other assets. You create the document with the help of a legal or financial professional and then retitle assets to ownership by the trust.
Upon your death, the assets are distributed to your trust beneficiaries. Since you name the direct beneficiaries in the trust, the assets bypass probate. That could help your heirs receive their inheritance faster and at less expense.
Take advantage of accounts with beneficiary designations.
Trust assets aren’t the only assets that bypass probate. Any account with a beneficiary designation avoids the probate process. That includes life insurance, annuities and qualified accounts such as IRAs and 401(k) plans.
Consider ways you can maximize these assets to take advantage of the probate bypass. For example, you may consider putting assets into an annuity. Many of these products have other attractive features like guaranteed* rates of return and market risk protection. A financial professional can help you determine the best strategy for your needs.
Ready to develop your probate plan? Let’s talk about it. Contact us today at Jim Lee Financial. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
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