Estate planning is no longer just for the wealthy. It is an essential tool that almost everyone needs to have to ensure that their assets are distributed according to their wishes when they die.
With a plan, family members could avoid significant tax burdens and costly legal battles.Families can reduce these expenses by adequately executing an estate plan and/or considering an estate sale solutions, keeping more of their estate for the people they care about most.
Protects Your Assets
Often, estate planning is associated with death but can also protect you and your assets from the financial pitfalls of disability or incapacity. This can include designating a power of attorney or healthcare proxy who will make medical and financial decisions when you cannot speak for yourself.
Asset protection is a process that involves assessing your current situation, identifying future goals and designing strategies for accomplishing these goals. It requires thorough knowledge of putting a house in a trust, federal and state exemptions, bankruptcy, taxes, estates, and business and corporation laws.
Whether you have significant real estate or small cash, you must regularly review your personal and financial assets. This will help you decide whether you need to employ estate planning services to update your plan.
Probate is an expensive, time-consuming and sometimes adversarial process. It also invites disgruntled heirs to contest your will and exposes your family to unscrupulous solicitors.
A good estate plan can circumvent many of these problems. It can also save your heirs and beneficiaries much grief, time, and money.
For instance, if you name your spouse as the primary beneficiary of an asset (like a life insurance policy or IRA), that property passes directly to your spouse. It doesn’t need to go through probate. Similarly, if you give an heir a gift before your death, that gift may be tax-free – provided the value of your skills doesn’t exceed the IRS’s annual gift limit of $16,000 per person.
An estate plan can minimize the amount of money or assets you give to Uncle Sam before passing on your wealth to your heirs. Planning can also help fulfill your wishes for funeral and burial services, education funding and charitable giving.
One strategy is to minimize the capital gains tax heirs will pay when they sell assets. This can be accomplished by holding low-basis assets such as stocks or a house until death when the basis is increased to market value.
Another way to save on taxes is to make gifts during your lifetime. This can be done by setting up a donor-advised fund or making a charitable contribution.
Moreover, it is essential to be careful about gifting assets that appreciate value. In such cases, giving them away now may be better than waiting until death when the basis is stepped up to the market.
While you’re alive, you can take steps to prevent disputes from arising regarding your estate. Creating safeguards to minimize future conflicts can help avoid unwanted litigation in the wake of your death, which could cause significant expense and delay probate and distribution of assets.
According to the Fort Worth Estate Planning law firm Baker-Heath PLLC, many trust and estate issues can be avoided by proper preparation. This includes addressing unfilled expectations, uneven wealth distribution and other potential family problems.
It also helps to appoint a neutral decision-maker ahead of time, not create joint interests and provide clear instructions.
It’s also a good idea to appoint someone to manage the estate if you cannot do so yourself. This person can be an executor, trustee or another professional to avoid family bickering and conflict during the distribution process.