Determining how to divide your estate after your death may not be the most pleasant use of your time, but it is an essential task if you want to ensure your loved ones inherit the assets you worked so hard to earn. Unfortunately, most individuals habitually delay the estate planning process to the point where they end up avoiding it altogether. One survey reveals that 62% of Americans don’t even have a will, and of those that do, 12% created them in the past 12 months.
Ultimately, unless you have adequate estate planning measures in place, you won’t be able to protect your family from upsetting disputes that generally result from the after-death probate court experience. Fortunately, Piercey & Associates, Ltd. is a reputable law firm that focuses on estate planning, tax elimination, and asset protection to help you navigate this delicate process as quickly and painlessly as possible.
What is Estate Planning?
A common misconception is that estate planning is only necessary for wealthy individuals. In reality, all families need to proactively plan for the sudden death of a loved one. Thus, if you want to make sure your family is taken care of after you die, and you want certain assets to be passed on to your heirs, producing participating in estate planning is vital. Estate planning is “the arranging for the disposition and management of one’s estate at death through the use of wills, trusts, insurance policies, and other devices.”
A common misconception is that estate planning is only necessary for wealthy individuals. In reality, all families need to proactively plan for the sudden death of a loved one.
Aside from the obvious reasons, methodical preparation can also reduce most or all of the estate and inheritance taxes your beneficiaries would otherwise be liable to pay. Lastly, your arrangements don’t need to be final—you can always review and make adjustments to your plans in the event your personal or financial situation changes.
Consider Your Assets & Create a Plan
If you die without any estate plan—called “dying intestate”—the government will decide who your beneficiaries are and the distribution of your assets. Each state has its own laws as to which family members will likely collect an inheritance, and creditors often have first shot at the assets. The estate planning process is also imperative if you are not formally married because common-law spouses lack the same property rights as legally wed couples, explains Piercey & Associates. Creating a plan is critical if you don’t want your assets to end up in the hands of the wrong person.
Before you can prepare your will or trust, you must consider where you want your asses to be distributed if you pass, which also includes personal property and accounts. Some people assume they don’t have enough things to participate in estate planning, but after taking a closer look, they might just be surprised. Some of the assets you should incorporate in your will or trust include real estate, automobiles, recreational vehicles, collectibles and antiques. Additionally, intangible assets can encompass checking and savings accounts, financial securities, life insurance policies, retirement plans, a business entity—and more.
Revocable Living Trust
Piercey & Associates, Ltd. usually recommends developing a revocable living trust (RLT), which has some clear benefits over a will. An RLT is a three-party fiduciary relationship where the first party (grantor) forms a trust and transfers it to the second party (trustee) for the future benefit of a third party (the beneficiary). The main benefit of an RLT is avoiding probate. Probate is a court-supervised process that surviving relatives must deal with to transfer asset ownership from the descendent to the beneficiaries. Regardless of whether an individual leaves behind a will, probate is required. Overall, writing a will does little to protect your loved ones from creditors and claims against your estate, explains Piercey & Associates, but a RLT can offer asset and creditor protection.
Consider Your Family’s Needs
For most people, the primary goal of estate planning is to ensure their family is taken care of after their death. This type of planning is essential when individuals are the sole provider in their household, or family members depend on their salary to get by. The legal team at Piercey & Associates is well versed in asset protection to ensure your family’s needs are covered if the unthinkable is ever to occur. Asset protection involves employing a variety of legal strategies to make it difficult or impossible for creditors and other parties to lay claim to your assets, which means more for your family to inherit. Some of the best asset protection methods include a properly drafted domestic asset protection trust, various forms of insurance, retirement plans, LLCs, and homesteading, to name a few.
Assign Important Roles
If you create a plan, then you must name a trustee and/or an executor. As the names implies, the trustee and/or executor is responsible for executing various tasks to make sure the wishes stated in a person’s trust and/or will are satisfied. Often, people will ask a family member or close friend to serve in this trusted fiduciary role. However, if you have a complex estate or the odds of a family dispute are high, things might go a lot more smoothly if you choose a seasoned legal professional with experience serving in this capacity to act as your trustee and executor. Not to mention, executor's jobs can be confusing, time-consuming, and very stressful, so it makes sense to appoint someone with the right background knowledge. In general, these individuals have several important roles. First and foremost, they are responsible for locating and communicating with the deceased's beneficiaries to explain the estate settlement process. After the trustee and/or executor collects the assets, they make sure the necessary tax returns are filed and distribute the assets pursuant to the plan. There is very little that can’t be accomplished with a properly drafted plan, explains Kenneth Piercey, of Piercey & Associates.
A power of attorney (POA) is a legal document that enables an “agent” or “attorney-in-fact” to make decisions on your behalf, usually after you become disabled, even if only temporarily. For instance, if you are in an accident that leaves you incapacitated, your agent needs to make medical and financial decisions that drastically affect your life. Someone that belongs to the military might assign a power of attorney before being deployed overseas so that a trusted individual can handle their affairs should they be badly injured. Most importantly, you want to name someone you trust and who you’ve discussed possible outcomes with. Without a POA, a guardianship court case is required to handle the assets and medical decisions, which is a very costly and time consuming process involving a judge, a guardian ad litem, and the attorney for the petitioner who is desiring to assist the disabled person.
Understand Estate Tax Laws in Your State
Estate taxes refer to the levy placed on properties, such as cash, real estate, personal property, retirement accounts, life insurance, and any other assets in your gross estate. While the majority of American’s won’t face federal estate tax because it’s only imposed on assets that exceed a particular exemption level—$11.58 million for individuals and $23.16 for married couples for the 2020 tax year—state taxes are a different story. According to the Tax Foundation, twelve states plus the District of Columbia enforce estate taxes and six levy inheritance taxes. One of the simplest ways to reduce the amount owed is by reducing the size of your estate before your death. At the moment, Federal law allows you to gift $15,000 without having to deal with the Internal Revenue Service. For those that are in the financial position to hand over some of their loved one’s inheritance early, this is a quick and easy way. If you want to handle things differently, the legal professionals at Piercey & Associates are equipped with more than 70 tools and techniques to help you eliminate your tax liability.
Estate planning without any outside help from a professional can be a time-consuming and complicated endeavor that often leads to financial disaster. As such, consider hiring a reputable professional to guide you through the process and ensure your final wishes will be honoured. The largest financial transaction of your life is usually the transfer of your wealth after death, so consider the wisdom of hiring a professional to accomplish this transfer in the most tax efficient and prudent manner.