What is Estate Planning?
Whether young or old, we can all be sure that our time here is temporary. When a person’s time comes around, it is ideal if all affairs are in order before that moment.
Estate planning involves organizing and allocating assets for management and distribution after death or incapacity. It involves creating legal documents and making important decisions to ensure that assets are protected, loved ones are taken care of, and wishes are carried out according to your specific instructions.
One of the primary goals of estate planning is to avoid the probate process, which can be time-consuming, costly, and public.
Estate planning also provides the opportunity to safeguard assets from potential creditors and reduce estate taxes. Through the use of trusts, you can shield your assets from creditors and protect them for future generations. Proper estate planning can also help reduce or eliminate estate taxes, allowing you to pass on more of your wealth to your heirs.
The process of estate planning involves working closely with a skilled estate planning attorney who can guide you through the legal complexities and help you develop a solid estate plan tailored to your specific needs and goals. These experienced attorneys have in-depth knowledge of estate planning tools and strategies and can assist you in drafting the necessary legal documents, such as wills, trusts, and power of attorney forms. [1]
Why is Estate Planning Important?
Without a proper estate plan in place, your assets may be subject to the intestacy laws of your state. This means that the court will determine how your assets are divided, which may not align with your desires. With an estate plan, you have the control to designate beneficiaries for your assets and ensure that your estate is distributed as you intended.
Another important aspect of estate planning is to protect your minor children. By appointing a guardian for your children in your will, you can ensure that they will be cared for by someone you trust. Without this designation, the court will decide who will take custody of your children without your input.
What is the Probate Process?
When a person passes away, their estate typically goes through probate, which ensures that their final wishes are carried out and that all legal obligations are fulfilled. The probate process begins with the filing of the deceased person’s will with the appropriate court. If there is no will, the court will appoint an administrator to handle the estate.
During probate, the court will oversee the payment of any outstanding debts or taxes owed by the deceased person. This includes notifying creditors and giving them an opportunity to submit claims against the estate. The executor or administrator is responsible for gathering and appraising the deceased person’s assets, such as real estate, bank accounts, and investments.
Once all debts and taxes are paid, the remaining assets can be distributed to the beneficiaries outlined in the will or determined by intestacy laws if there was no will. The court will oversee this distribution process to ensure that it is done in accordance with the deceased person’s wishes or the legal requirements.
The probate process can take several months or even years to complete, depending on the complexity of the estate and any legal challenges that may arise. It can also be a costly process, as court fees and attorney fees may be involved. With an effective estate plan in place probate can be avoided and the entire process can be streamlined.
What Assets are Excluded From Probate?
Not all assets are subject to probate. Some assets will pass directly to beneficiaries outside of probate. These include assets with beneficiary designations, such as life insurance policies, retirement accounts, and investment accounts.
When a person designates a beneficiary for these types of assets, they will bypass probate and go directly to the designated individual.
What Assets are Included in Probate?
Assets that are included in probate are those that are solely owned by the deceased person and have no designated beneficiary. This may include real estate properties, bank accounts, stocks, bonds, and personal belongings.
These assets will be subject to the probate process, which involves inventorying the assets, appraising their value, and distributing them according to the deceased person’s will or intestacy laws if there is no will.
Even if an asset is included in probate, certain strategies can be implemented to protect it from creditors or ensure its efficient distribution.
Creating a revocable living trust can help avoid probate altogether for assets transferred to the trust during the person’s lifetime. Assets held jointly with rights of survivorship or assets with designated payable-on-death beneficiaries will also bypass probate.
Who Handles the Probate Process?
The executor or personal representative is typically appointed by the deceased person’s will to oversee the probate process. This individual is responsible for carrying out the deceased person’s wishes as outlined in the will.
The executor’s duties include locating and valuing the assets, paying any outstanding debts or taxes, and distributing the remaining assets to the beneficiaries.
In cases where there is no will or the executor is unable or unwilling to fulfill their duties, the court may appoint an administrator to handle the probate process.
The administrator serves a similar role to an executor, but instead of following the instructions of a will, they must distribute the assets according to the intestacy laws of the state.
What Are the Benefits of Going Through the Probate Process?
One of the primary benefits of the probate process is that it provides a legal framework for the distribution of assets. When someone passes away, their assets need to be properly transferred to their beneficiaries.
Probate ensures that this transfer is done in a fair and orderly manner, following the instructions outlined in the deceased person’s will. This process helps minimize any potential disputes among family members and provides a sense of closure for everyone involved.
Another advantage of the probate process is that it offers protection for creditors. During probate, any outstanding debts or taxes owed by the deceased person are identified and paid off using their assets.
This ensures that creditors are given the opportunity to recover any money owed to them. By going through probate, the executor or administrator can resolve these financial obligations in a systematic and transparent way, protecting the deceased person’s estate from future creditor claims.
Probate provides a level of oversight and accountability. The executor or administrator appointed by the court is responsible for ensuring that the deceased person’s wishes are carried out effectively. This accountability can help prevent any potential misuse or mismanagement of assets, providing added protection for beneficiaries and heirs.
Why Is It Important to Have an Estate Plan Which Includes Children?
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Guardianship:
One of the most significant reasons to have an estate plan for minor children is to appoint a guardian. In the event that both parents pass away or become incapacitated, a guardian will step in to take care of the children.
Without a clear designation in your estate plan, the court will have the final say in determining who will take custody of your children. By including your choice of a guardian in your estate plan, you have the opportunity to select someone who shares your values and who you trust to raise your children as you would. -
Financial Support:
An estate plan can ensure that your minor children's financial needs are met. Through a comprehensive estate plan, you can set up trusts or establish provisions that provide financial resources for your children's education, healthcare, and general well-being. -
Asset Protection:
An estate plan can protect your children's inheritance from potential creditors or other legal risks. If your assets pass directly to your children without any safeguards in place, they may be vulnerable to their own financial mistakes or claims from creditors. By setting up trusts or other mechanisms within your estate plan, you can ensure that your children's inheritance is protected until they reach a certain age or meet specific milestones. -
Minimize Family Disputes:
An estate plan can help minimize potential conflicts among family members. Clearly outlining your intentions and wishes for the care and support of your minor children can help prevent disagreements and disputes among relatives. By having a well-documented plan in place, you can provide a sense of certainty and avoid potential legal battles over your children's custody or inheritance. -
Continuity of Care:
An estate plan can ensure that your children's day-to-day care and routines are not disrupted more than necessary. By appointing a guardian and providing instructions on their upbringing, you can help maintain stability and continuity in their lives. This can be especially important if there are specific values, religious beliefs, or cultural traditions that you want your children to be raised with.
Consulting with an experienced estate planning lawyer at Lein Law can help you navigate the process and create a plan that matches your specific wishes and circumstances. Don’t hesitate to call us today!
Source
[1] What Is Estate Planning? Definition, Meaning, and Key Components. (2021, April 30). Investopedia. https://www.investopedia.com/terms/e/estateplanning.asp
