Even if you do not have a lot of money, assets or property, you still have an estate. Legally, your estate is everything that you own. This includes all of your furniture, savings accounts, real estate, vehicles, life insurance and investments. Whether you have a large or small estate, you need to create an estate plan for after you die.
The old saying that only death and taxes are certain is entirely true when it comes to estates. You know that someday you will die, so you must create a plan in advance so that your family does not end up struggling to make ends meet. Without an estate plan, your possessions may end up in probate court until a judge can determine what happens. Other than the legal fees and court costs associated with probate, there is also a time factor to consider. If the estate is contested, it can take up to ten years to distribute. Even without any problems, a small estate can take 18 months to work through probate court. Save your family the stress, monetary costs and time by preparing an estate plan early.
The Back Up Plan
If you do not have an estate plan, your state already has one for you. When you become disabled mentally or physically, a state appointee will make decisions about your assets. The court will control how you are cared for through a guardianship or a conservatorship. Other than being expensive and time consuming, this option means that the state determines your care instead of your family.
Likewise, someone who dies without an estate plan leaves the decisions about their estate up to the government. In most states, your children and spouse will receive a portion of the estate. This means that your spouse could receive a smaller portion that is not enough to care for them as they age. If there are minor children involved, the court will end up controlling the inheritance for them.
Start by Creating a Living Trust or a Will
The first step in creating an estate plan is to create a will. A will basically writes out your instructions about how your estate will be divided, but the estate will still have to go through probate court. Any assets that are only in your name will have to go through the probate process before they can be given to your heirs. While the process varies in different states, it always becomes expensive as court fees, legal costs and executor fees add up. Even worse, these files are generally open to the public so that anyone can read about your family and financial situation.
To skip probate, you can transfer some of your property and assets into your name and someone else’s name. For example, annuities that are jointly-owned by you and your spouse will automatically transfer to your spouse after you die. You should also name a valid beneficiary to ensure that jointly-owned assets transfer without going through probate.
To ensure that your estate can be distributed immediately among your heirs, you can create a revocable living trust. This prevents the courts from controlling your assets after death or a disability. All of your assets are combined into one plan and kept completely private. Assets can remain in your trust after death for as long as you decide. If some of your beneficiaries are minors, you can choose to have the trust managed by a trustee that you choose until your heirs reach a set age.
Initially, a living trust will cost more than a will. After your death or disability, it will end up saving your family a significant amount of money on court costs and legal fees. If you want to ensure that your family is cared for in any circumstance, creating a will, forming an estate plan and designing a living trust will ensure that you can care for your loved ones long after you have left the earth.