Estate planning strengthens financial planning: one without the other creates the potential for problems.
An estate plan is necessary for any adult, whether they are wealthy or can fit all of their belongings in a suitcase. Are you surprised? An estate plan does far more than just tell the court how you wish to allocate your assets after you die. It is also a means of conveying your wishes about care, if you should become incapacitated and protects minor children by giving you the chance to name a guardian. An estate plan also tells the court how you would like to distribute your assets, and if it includes a living trust, can add a level of privacy to your estate plan. Without an estate plan, your financial plan is completely at risk.
The Chicago Daily Herald’s article, “Estate planning basics and avoiding probate with a living trust,” explains that the first step in the estate planning process is preparing a list of your assets. You should review the assets you have and how they’re titled. Once you have this set, think about what you want to happen to your assets after you die.
A basic estate plan starts with a will. This document explains what you want done with your property after your death. A will is filed with the court upon your passing, and the executor of the will distributes your assets according to the will’s terms. Probate is a legal process whereby the courts determine how to distribute assets titled in your name among your heirs. Probate records are public records that anyone can access. The process takes approximately four to six months at a minimum, although it can often take longer. Probate is frequently required if the total value of the probate assets exceeds a set amount, or if there is any real estate.
Assets that are held individually with no named beneficiary will go through probate. However, not all assets must go through probate. Qualified assets, such as life insurance, annuities, IRAs, and 401(k)s with named beneficiaries will go directly to those named beneficiary(s) and will avoid probate. Those assets that have a payable on death or transfer on death designation will also pass directly to the named beneficiary(s) and avoid probate. This could be a checking or savings account. Finally, assets that are held jointly with rights of survivorship will go to the survivor. This is commonly the family home.
A Living Trust
A living trust is a document that states where you want your assets to go after you pass, but unlike a will, it keeps your assets out of the probate process so that your private business remains private. In addition to privacy, a living will lets you assign a family member, friend or corporate trustee to distribute your assets. An estate planning attorney will be able to help you properly set up a living trust that is best suited to your situation.
Reference: (Chicago) Daily Herald (December 22, 2016) “Estate planning basics and avoiding probate with a living trust”