You have probably accomplished a lot with your life. Over the years you have worked, planned and saved. Perhaps you have even made some sacrifices to achieve your current level of success. It’s a safe bet that you’ll want to transfer your accumulated assets rather than pay court costs, taxes, or attorney fees.
Estate planning is the relatively simple process by which you prepare legal documents outlining your wishes for your estate after your death. It can be difficult to plan for the end of your life, but this planning is necessary to protect your family and your assets.
What is your heritage?
Your wealth refers to your property, those things you own, including your total assets and liabilities. Your property includes your home, car, accounts (ie bank, retirement, and brokerage), jewelry, insurance policies, etc.
The language of estate planning
Understandably, the idea of making plans for your family after you die can be a bit scary. Familiarity with the terms used in estate planning will help you begin to feel comfortable with the process.
Estate: Refers to your property or those things you own.
Property – includes two categories, real property (such as real estate/your home(s)) and personal property, which includes everything else such as stocks, bank accounts, car(s), jewelry, etc.
Intestate: It is a previous or unplanned state. Dying intestate means that you have died without creating a will or trust to outline your wishes for the distribution of your estate.
Trust – Eliminates many of the financial risks by planning to transfer your estate from you to your heirs upon your death. Risks include taxes, inheritance, lawyers, creditors, lawsuits, etc. A trust can provide administration of your estate if you become incapacitated, as well as reduce estate taxes and ensure a smooth transfer of your property according to your wishes. Trusts can be revocable or irrevocable. Talk to your tax or legal advisor about the benefits of each.
Probate: The process by which your personal property is legally transferred to your heirs after your death. The probate process also identifies legitimate heirs and determines how your assets will be distributed among them. Probate can be quite expensive (up to 10% of the net worth of your estate), but the expense can be avoided with estate planning.
Will: A written legal document that describes your wishes about your real and personal property after your death. You can also add a guardian for any minor child.
Beneficiaries: These are the people you designate to benefit from the distribution of your real and personal property at the time of your death.
Your will can be an important tool in your estate plan. The goal of the estate plan is to allow you, rather than the probate court and attorney, to maintain control of your assets. Planning gives you the opportunity to establish clear directions and wishes for your assets in the event of death or physical or mental incapacity.
Estate planning is a necessary and painless process. You will have peace of mind and pave the way for your heirs in terms of property transfer upon your death.
