Do you have an estate plan? It’s an important part of any long-term financial strategy, especially as you enter retirement. An estate plan addresses your assets and how they should be distributed after you pass away. It can help make sure those assets go to the correct heirs and that your family is taken care of after you’re gone.
You can also use your estate plan to eliminate taxes and other costs. Estate taxes are usually only an issue for the ultrawealthy, but there are other expenses and complications your heirs could face.
One of the biggest potential costs is probate. That’s the legal process for settling one’s estate. Every estate goes through probate, even if a will exists. The probate process usually includes tasks such as notifying heirs, paying debts, selling property and filing taxes. Probate can take weeks or even months, and it can delay the distribution of assets. It can also be expensive, as your estate may need to hire attorneys, accountants and others.
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.
One of the best ways to minimize the impact of probate is simply to remove assets from your estate. You can do this 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 the gifts aren’t fair. If the gifts will create conflict, you may want to consider an alternate plan.
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.
Life Insurance, Annuities and Qualified Accounts
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 First Fidelity Group. 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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