Estate Planning Best Practices

Estate planning is the process of organizing your affairs so that your loved ones can be cared for if you die or become incapacitated. Due to the importance of estate planning, you must do the right things to make the estate planning process easy. Besides hiring a reputable estate planning attorney, some of the other things you should do include:

Have a list of your valuables

First, go through your entire home, inside and out, and compile a list of all valuable stuff. Examples include the house, televisions and computers, jewelry, collectibles, automobiles, art and antiques, lawn equipment, and power tools.

As you explore, make notes if you come across something you want to leave for a specific person. Don’t forget about sentimental belongings like family photos.

You also should list items you wish to contribute to a favorite charity.

To ensure you can remember the items, consider taking photos.

You will even be better off if you can ask someone to help you.

Put together your debts.

You should make a separate list of all your open credit cards and other obligations. This may include vehicle loans, mortgages, home equity lines of credit (HELOCs), and any other debts or open lines of credit you have.

Take note of the account numbers, locations of signed agreements, and contact information for the companies that hold the debt.

You should include all your credit cards, noting which ones you use frequently and which are sitting in a drawer unused.

You should note that you can simplify the process by adding a current statement or document with the necessary account information.

Have a list of all your memberships.

You should list all the groups you belong to, such as AARP, The American Legion, a veteran’s association, a professional certification association, or a college alumni club.

This is because, in some situations, these organizations may provide their members with free accidental life insurance benefits, which their beneficiaries may be qualified to receive.

Include any other charities that you support. You can tell your beneficiaries about the charitable organizations or causes that are important to you and to which you would wish donations made in your memory.

You also should note any recurring gifts you make to a nonprofit organization so that your heirs can cancel or continue them.

Document your nonphysical assets.

Add your financial holdings and entitlements to the list, ensuring they are explicit enough for your heirs to claim.

This includes bank and brokerage accounts, 401(k) plans, IRAs, life insurance policies, and other policies like long-term care, auto, disability, and health insurance.

You should include account numbers and the location of any physical papers you possess. List the contact details for the companies that own these non-physical items.

If it is easier, attach a recent statement or similar paper document with crucial information such as the account number, company, and contact information.

Review your retirement accounts.

Accounts and insurance with chosen beneficiaries will be transferred directly to those people or entities following your death.

Remember that it makes no difference how you direct the distribution of these accounts or policies in your will or trust. If there is a dispute, the beneficiary names for the retirement account will take precedence.

Check your online account, or contact your employer’s customer support team or plan administrator, for a current list of your beneficiary selections for all accounts.

You should examine them to ensure they are current. This is especially significant if you are divorced and remarried.

Find a responsible estate administrator.

When you die, your estate administrator or executor will administer your will. You must hire someone accountable and capable of making decisions.

Your spouse is not necessarily the greatest option, as they might be extremely affected by your demise.

You should consider how the emotions surrounding your death will influence this person’s decision-making skills.

If you anticipate any problems, consider other competent candidates. You could name a close friend or family member whom you trust to act impartially on your behalf.

Update your insurance

Life insurance and annuities, like retirement funds, pass directly to your specified beneficiaries. If you have life insurance, ensure your beneficiaries are up-to-date and accurately named.

In terms of timing, this could be the most crucial aspect of your estate plan. Your heirs will require instant access to some of your assets to meet their basic requirements and organize for your burial.

Draft your will

Everyone above the age of eighteen should have a will. This is because it is the rulebook for distributing your possessions, which may avert havoc among your heirs.

It’s best done as soon as you’ve completed all of the above-mentioned documentation. Your list of assets will make it easy to determine who receives what.

A will might appoint a guardian for minor children and specify who will care for your pets. You can also give assets to charitable organizations in your will.

Wills are generally affordable estate-planning documents to create. Your wills and trust attorney Largo will assist you in making a will for a small fee, depending on the complexity of your assets and the geographic region.

You can also create your own will using online tools or software.

When you make a will, sign and date it in front of two unrelated witnesses, who should also sign it, you should then get it notarized.

Finally, ensure that others are aware of the document’s location so that they can access it when necessary.

Simplify your finances

If you’ve changed jobs in the past, you may still have multiple 401(k) retirement plans or IRA accounts with previous companies. If this is the case, you should consider combining these accounts into a single individual IRA.

Consolidating accounts provides better investment options, reduced fees, a more comprehensive range of assets, less paperwork, and easier management for you and your heirs.

Guide on How to Distribute Wealth to Your Children

Dividing your estate among children can be a tough affair. In many cases, the obvious option—an equal distribution of assets among children—is the best choice. However, in other families, giving each child the same inheritance may not make sense.

As any estate planning attorney will tell you, there is a distinction between leaving an equal legacy, in which each child receives the same amount, and an equitable inheritance, in which each child receives what is fair based on their circumstances.

So, when is it appropriate to leave the same legacy to each of your children, and when does a different arrangement make more sense? And how will each decision affect sibling harmony and whether your wishes be carried out as intended?

Let’s find out.

When to give equal amounts

If there are three children, an equitable division clearly means that each will receive one-third of the residual inheritance after both parents have passed away.

It makes sense for each child to get the same inheritance when each child has similar needs and is similarly situated in life, each child has received similar support in the past from their parents, and each child is mentally and emotionally capable and responsible.

For example, if all of your children have graduated from college (with you paying their tuition) and no longer rely on you for financial support, if no child has a disability or serious illness, and if they have all demonstrated financial responsibility, it is logical to divide your assets evenly.

If your bequests include real estate and other tangible assets, you must calculate the value of each asset and decide what is best to leave to each kid.

Even if you believe one or more of your children do not deserve what they are getting, leaving an equal amount can assist in preventing the emotional and financial expenses associated with conflict.

When to offer different amounts

Sometimes giving each child an equal share of the pie may not always feel right. For example, if one of your children is caring for you, you may want to reward them or compensate for lost time and wages.

Perhaps you’ve given one child significantly more money than you’ve given another, such as a substantial amount for a wedding, graduate school, or a down payment on a home.

In this case, instead of leaving your two children with equal inheritances, you may leave less to the child you previously gifted money and more to the child you did not. This distribution adheres to the equitable, not equal, rule.

If you have a child who is unable to care for themselves, you should leave the majority of your inheritance to fund that child’s care through a special needs trust.

A disabled child may require economic support to cover basic living expenditures as well as funding for continuing medical requirements.

Siblings will likely understand the circumstances and will not be insulted by receiving less money, but it is still a good idea to inform them of your plans so that there are no shocks after your death.

Can a child sue for more?

Yes, a child can sue for more, especially when they feel they have been shortchanged.

If you choose not to split your assets evenly among your children, be aware that you are putting your plans and your children in danger of a lawsuit.

What is the significance of this risk, and how likely is it that the outcome will be a different asset division than you desired? Children can sue to contest a will, but with proper estate planning, you can help limit the risks.

The first stage is to create your will with the help of an estate planning attorney while you are of sound mind and memory and without any undue influence from one of your children.

Undue influence means that one of your other children believes—or thinks it may be proven in court—that you were manipulated while drafting your will.

As a result, that youngster claims, you voiced wants that you would not have made otherwise or that were not truly your desires.

You won’t be able to defend yourself against such a claim, therefore make sure no one can successfully debate it.

Lack of capacity is another way a will can be challenged. This challenge indicates that you didn’t understand what you were doing when you made or amended your will, either due to your age or a physical or mental ailment that has harmed your ability to make sound choices.

A child could potentially claim that your will is invalid due to fraud or because your signing was not witnessed.

How do you protect your wishes?

There are steps you can take to reduce the likelihood of a less-favored child fighting your will in court, as well as the likelihood of that child winning if that happens.

A no-contest clause paired with at least some nominal gift can create a disincentive to challenge. A non-contestability provision is simply text in your will that states that any inheritor who contests your will will forfeit any bequests.

That’s where the nominal present comes in—for the clause to work, your child must have something to lose. You’ll need to give the less-favored youngster enough leeway that they’ll likely benefit more from remaining silent than from appearing in court.

It’s an unpleasant option, to be sure, but it may provide the best chance of keeping your will intact. The enforceability of these clauses differs by state, so consult your state’s laws before contemplating this alternative.

According to an estate planning lawyer Bowie, other measures to avoid challenges to your will include the following:
Using a trust to give structure to a youngster who may be unable to manage their inheritance responsibly on their own.
To disprove accusations of lack of ability, have your doctor witness your will when you sign it.
Excluding all children from the will-writing process to prevent charges of undue influence.
Discuss your wishes with each child to avoid surprises and to explain your reasoning.

A case of this nature is most likely to result in a settlement. That settlement will in some way vary your estate plan, because funds will likely end up in a different place or with a different person than you had hoped.

Reasons You Should Have a Good Estate Plan

Estate planning can help you avoid many terrible scenarios, and while it may require some time and money upfront, it can save you from many serious problems later on.

For example, if you do not offer a clear estate plan, the state will do what it believes is best with your estate, which is unlikely to be what you would choose. Do not leave your estate to the state.

Working with your estate planning lawyer and having an estate plan comes with plenty of perks. These perks include:

You minimize family squabbles

Your family may get along well most of the time, but it’s still a good idea to prepare a will to ensure this continues. The prospect of a monetary grab may agitate some relatives, while others may conceal a personal gem that they hope goes unnoticed.

Regardless of your wealth, careful estate planning can save your family from bickering, whether it’s a minor disagreement or a full-fledged lawsuit.

You clarify your directives

You may have always planned for your niece to inherit that heirloom, but unless it is explicitly stated in the estate, anyone can take it.

An estate plan guarantees that your assets go to the person you wish to receive them. By carefully stating your preferences, typically with the assistance of a lawyer, you can ensure that your loved ones remember you fondly and receive what you meant.

You minimize taxes

If you plan ahead, you can reduce the amount of your estate that goes to Uncle Sam while increasing the amount that goes to your relatives.

Cleverly structuring flexible retirement accounts, such as a Roth IRA, can assist in transmitting more tax-free money to your heirs, while other tax-planning methods, such as strategic charitable giving, can help you reduce your tax burden.

You should work closely with your attorney and find strategic ways to go about it.

You avoid a probate court

Set up your estate correctly, with a well-crafted trust, and you’ll breeze through probate court, which is perhaps the most tedious and time-consuming part of the entire process.

Work closely with your attorney and establish a plan that will save you a lot of time and money in the long run.

You protect your heirs

A proper estate plan can also help safeguard your heirs. If your children are minors, your estate plan can specify who will care for them and how they will get money.

It can also shield heirs from repercussions if a relative accuses them of theft. A living will can also assist heirs avoid some of the tough health decisions that arise at the end of a parent’s life.

You keep your family assets together

Estate planning is an effective strategy to keep your money in the family. A trust, when properly structured, can prevent a squandering nephew from wiping out your entire life’s savings in a matter of years. It can also help keep money inside the family if an ex-spouse attempts to take some of it.

Types of estate planning

Estate planning comes in different forms, ranging from simple beneficiary designations when you create a bank or brokerage account to more intricate and extensive arrangements. The following are some of the most common types of estate planning:

A will

At death, a will specifies where the assets you possess individually that do not have a designated beneficiary should go. Property owned jointly, such as with a spouse, flows immediately to the remaining owner(s).

The court will designate an executor to carry out the will and oversee the division of assets when the time comes.

Wills that go into effect are scrutinized in probate court, a public proceeding that allows possible creditors to file a claim against the estate. Only after the estate has been settled with creditors will the residual assets be allocated to the heirs in line with the will.

Beneficially designations

Whenever you open a financial account, such as a bank, brokerage, or insurance account, you will be asked to designate a beneficiary.

When you die, the beneficiary will be the first to collect any funds from the account. If you wish, you can distribute your assets among numerous beneficiaries and designate contingent beneficiaries in the event that the principal beneficiaries die.

Naming a beneficiary is critical: Your beneficiary selection normally takes precedence over any other declarations in your inheritance.

If you die without a will, accounts with stated beneficiaries may still pass directly to your heirs.

Trusts

Trusts come in many different forms, and while they may appear complicated, they are actually quite simple at their foundation. A trust is a legal structure that enables a third party, to hold assets on behalf of a beneficiary.

Trusts provide you with a variety of estate-planning alternatives, the most notable of which is the potential to avoid probate court while keeping a high level of anonymity.

Trusts provide you control over how your assets are distributed after your death, not simply who receives the money but also under what conditions.

This control can be useful when allocating assets to people who lack the competence or maturity to manage money. You can also specify whose trustee(s) you want to oversee and direct the trust after your death.

While trusts can be complex, one of the simplest and most straightforward is the revocable trust. Such a trust guides your assets through probate and directs them according to your preferences.

You can even serve as a trustee and make decisions during your lifetime.

More complex trusts with multiple requirements may necessitate the assistance of a qualified wills and trust attorney Upper Marlboro. Of course, trusts can also be used to avoid some taxes, which is one of the reasons for their perennial popularity.

Parting shot

As you have seen, there are plenty of benefits that come with having a good estate plan. You not only ensure that your property goes to the rightful heirs but also protect them from wasting time in court.

To have an easy time coming up with an estate plan, work with expert attorneys who will hold your hand.

What you Need to Know About Living Trusts

You’ve probably heard about the advantages of a living trust when it comes to putting together an estate plan.

Assets placed in a trust avoid probate, which is time-consuming and potentially costly.

Furthermore, a living trust allows you to name a trustee to administer your assets after you die, which is vital if your heirs are little children or adults who cannot handle a substantial inheritance.

While living trusts are great as they simplify the distribution of inheritance, many people make costly mistakes that make the process too convoluted for your estate planning attorney and heirs. What are some of the common mistakes?

Putting the wrong things

There are several things that you shouldn’t put in the living trust. They include: 401(k) plan, IRAs and tax-deferred annuities

According to Kris Maksimovich, president of Global Wealth Advisors in Lewisville, Texas, if you move any of these funds to your trust, the IRS would interpret the transaction as a distribution, and you must pay income taxes on the full amount. You don’t want this, do you?

To avoid this, you should designate your trust as the beneficiary of your retirement assets. By naming your trust as a beneficiary, you can control how your assets are dispersed to your heirs and protect the cash from creditors.

Failing to include vital items

The same way people add the wrong things is the same way they fail to add vital items. To stay safe, add the right items to your trust. The things that you should add include:

Real estate, including your home

It could be your most valuable asset, and it’s a good one to put in trust. This will shorten the time it takes to transfer the home to your heirs.

If you own property in another state, such as a vacation house, transferring the ownership to a living trust allows you to avoid probate in more than one state. You’ll need to draft a new deed transferring property ownership to your trust.

Transferring your home to a trust will help your selling capacity. While this is the case, you should note that to refinance your mortgage or receive a home equity line of credit, your lender may ask you to transfer the property from the trust and back into your name.

Once the transaction is complete, you can return the property to the trust.

Financial accounts

These include stocks, bonds, and mutual funds. You should also include certificates of deposit, money market funds, and bank savings accounts that are rarely used to write checks. You can even include your safe deposit box in the trust.

Adding these accounts requires some paperwork, so work with a professional who knows what they are doing.

Personal items such as collectibles, jewelry, and art

You don’t normally need to retitle these assets, but you should make a list with instructions to include them in the trust.

You can use the trust to specify who should receive these assets, which comes in handy in avoiding family feuds once you are gone.

This type of guidance can also be provided in a will, but a will becomes a public record, which is undesirable if your pearls are valuable.

While the car you drive around town is unlikely to belong in a trust, you may add any collectible vehicles you possess, especially if you believe the vehicle’s value will hold or increase over time.

After transferring and retitling assets to your trust, you should review it regularly to ensure it’s current.

The best way to go about it is to do the review on an annual basis. In other circumstances, every three to five years may be sufficient, although you may need to review (and maybe alter) the trust following a big life change, such as the sale of your house, the birth of a child or grandchild, or a marriage or divorce.

Do you need a trust?

As much as trust is important for you and your loved ones, you should note that it’s not for everyone. It’s not everyone that should create one.

Before you go ahead and find a lawyer and draft one, you should ask yourself whether it’s wise to get one in your current situation.

As previously said, funding a living trust needs some legwork and consideration of expense. Legal fees can also be high, depending on where you live.

A living trust may be worth the cost if it eliminates the complexities of probate.

Because most states exempt a specific amount of assets from probate, you probably don’t need a living trust if your estate is small—less than $100,000, for example.

Furthermore, if the majority of your assets are in retirement funds, you may not require a living trust because those assets will pass to beneficiaries outside of probate.

Life insurance with a named beneficiary will also avoid probate because the recipient will pay the death benefit.

You can make bank and other accounts receivable upon death to your heirs, in which case the accounts will avoid probate. Property owned jointly, such as a home you and your spouse own, will also pass to the surviving owner outside of probate.

Before you spend money on wills and trust attorney PG County, find out if your property is large enough for a trust. If not, save the money.

Parting shot

These are some of the things you should know about a trust. Many people shy from setting up a trust because they think it’s complicated, but it’s not.

Others avoid it as they have a will. You should note that while a will is an important aspect of estate planning, it is not a one-size-fits-all answer.

A will must go through probate, which may be an expensive and public process. A living trust, on the other hand, allows for a more private and efficient asset distribution.

If your property is large enough, there is no harm in having both a living trust and a final will and testament, offering you the best of both worlds.

Understanding Living Trusts

A living trust is a trust that you establish and fund while you are still alive.

The basic goals of a living trust are:

To manage and distribute assets and trust property to named beneficiaries without the probate court’s involvement.
To ensure that assets are transferred smoothly to named beneficiaries in the case of the grantor’s incapacity.
Assets are used to provide financial stability to family members.

You can establish a living trust as long as you are mentally and financially competent. There is no minimum age for establishing a living trust, though it is more customary for older people to establish one.

To establish a living trust, you must have assets to transfer into the trust and a clear knowledge of your trust’s aims.

When considering a living trust, it is critical to speak with a wills and trust attorney or a financial advisor, as they can help you assess whether a living trust is right for your case and provide information on the legal and financial concerns involved in establishing one.

Why should you have a living trust?

People establish living trusts for a variety of reasons. Some of the reasons you should consider getting the trust include:

To avoid probate

Probate is the legal process that follows the death of a person in which the court oversees the distribution of the deceased person’s assets.

When you have a trust, the assets flow immediately to the beneficiaries listed in the trust document without the requirement for probate court.

This not only saves you time, but also money.

To help with asset management

A living trust allows you, the grantor, to retain control over your assets administration and distribution during your lifetime.

You can serve as the initial trustee, deciding how the funds will be invested and managed. In the case of revocable living trusts, you can change the trust’s provisions at any moment.

However, in the case of irrevocable living trusts, you must obtain the beneficiaries’ agreement to change the trust provisions.

To ensure privacy

Individuals with large assets or those who prefer to keep their financial matters secret can use trusts and outlets to keep their information confidential rather than on the public record because it provides more privacy than a will.

To avoid contest

A well-drafted living trust specifying your preferences for asset distribution can help avoid contests over your assets.

This can help lessen the risk of disagreements among specified beneficiaries while ensuring that your desires are followed even in your absence.

Helps in planning for estate taxes

You can use a living trust for estate tax planning because you can establish certain trusts to reduce federal estate tax liabilities.

This can help you protect your assets’ value while reducing the overall burden of estate taxes.

Helps with the transfer of assets in the event of incapacity

If you are incapacitated, you can appoint a trustee to help manage the trust and make decisions about the assets on your behalf.

This can guarantee that assets are transferred smoothly to the chosen beneficiaries and prevent needing a court-appointed guardian or conservator.

How to establish a living trust

As mentioned, putting together a living trust can help ensure your assets are managed and dispersed in accordance with your preferences. The following are the stages required in establishing a living trust:

Decide on the type of trust you want

The first stage in forming a living trust is deciding on the type of trust you will establish.

As mentioned above, you can amend a revocable trust or revoke it at any time, whereas an irrevocable trust cannot be changed or canceled without the approval of the beneficiaries.

Before making a decision, weighing the advantages and disadvantages of each type of trust is critical.

Create a trust document.

The next stage is to draft a trust document once you’ve decided on the type of trust you wish to establish. This document defines the trust’s terms, which include:

The trustee selection.
Beneficiaries.
Any limits or restrictions on how the trust’s assets may be used.

Have the trust document notarized or signed by an attorney

For a trust document to be legally binding, you should have it notarized or signed by a lawyer. This guarantees that the document satisfies all legal standards and is legally enforceable.

Set up a trust bank account.

Setting up a separate bank account for the trust is recommended to make managing the trust’s assets easier.

This also ensures that the trust assets are not mixed with personal or corporate assets.

Transfer all the assets into the trust.

The final stage in establishing a living trust is transferring ownership of all the trust’s assets to the trust.

Real estate, bank accounts, stocks, and any other assets you wish to put in the trust are all acceptable.

Transferring ownership of these assets ensures that the trust is managed and distributed in accordance with the requirements of the trust document.

To ensure the trust is properly established and managed, speaking with an expert estate planning attorney is critical.

Difference between a will and trust

Many confuse trusts with wills, but the two are different.

A will describes how an individual’s possessions will be allocated after death and can be used to designate a guardian for young children. A will is only effective after the person’s death.

On the other hand, a trust is a legal structure in which a trustee keeps and administers assets for the benefit of the trust’s beneficiaries.

A living trust transfers ownership of assets to the trust while the grantor is still alive, and the trust conditions govern how the assets are divided after the grantor’s death.

Parting shot

This is everything you need to know about a trust. As you have seen, many advantages come with having one. There are also many types of trusts that you can get.

Regardless of the reasons and types of trusts that you get, ensure that you work with an experienced probate attorney PG County to help you put together a solid document.