How Organized Is Your Estate?
How would your family manage if you were to pass away? The reality is that this situation can be trickier than you might expect. For example, does someone know how to get into your phone? How would someone know where to look for all of your financial accounts? Would they be able to find your estate documents or insurance policies?
Estate planning can become vary complex depending on your wealth level, and in the right place, those strategies can be great. On the other hand, there are some simple things that you can do to save your loved ones a lot of time and hassle if something were to happen to you.
Here are some key things to be aware of:
- Probate Estate: Your “probate estate” includes the assets that were owned by you, but didn’t have a clear successor. These assets must pass through the court system, which is time-consuming and expensive, and all of the information is public. Generally speaking, one of the keys to a proper estate plan is making sure that the vast majority of your assets are positioned properly to avoid probate.
- Will: A will is critical in the probate process in that it spells out how you want your probate assets to be distributed to your heirs. A will is great to have and should be part of your estate plan, but it does not on its own avoid probate, so it’s also important to make sure your assets are positioned to avoid probate altogether.
- Trust: Trusts also come in two forms, revocable and irrevocable. Revocable trusts are important to have if you have young children or have specific wishes beyond your lifetime. As the name implies, these trusts can be changed during your lifetime, and only after you pass away do they become set-in-stone. These documents will outline who is to be in charge of the funds in the trust, who the beneficiaries are, and how the money will be paid out. An irrevocable trust, on the other hand, cannot be changed once in force. These types of trusts are often used for ultra-high net worth estate planning, often with the intent of reducing estate taxes.
- Asset Titling: how an asset is titled has some impact on what happens if you pass away. For example, a joint bank account with rights of survivorship (JTWROS) assumes that each person is the other’s beneficiary. Titling a house in a joint name has a similar effect. Assets can also be owned by trusts, which clearly outline succession rights. Understanding how the ownership of an asset is titled is critical to organizing your estate.
- Beneficiary Designations: This one may seem obvious, but making sure your various accounts have a beneficiary (or “transfer on death” designation) is critical. Beneficiary designations are often underappreciated as they avoid probate. Reviewing and updating beneficiary designations is one of the best ways to save your family time, hassle, and money if you passed away.
- Powers of Attorney: Powers of attorney are critical documents to have on hand. These come in two forms: springing and durable. If you are a durable power of attorney for someone, you can act on their behalf regardless of their mental capacity. With a springing power of attorney, you are only entitled to act on their behalf in the event of incapacity. Many estate attorneys recommend durable powers of attorney, as springing require action to be taken/incapacity to be proved before they can be used. These documents are critical in insuring that finances can stay afloat if you were to become incapacitated. If you have a power of attorney, make sure the person listed knows where to find it!
Please take the time to investigate the basic elements of an estate plan. If it’s been a long time since you’ve reviewed your asset titling and beneficiaries, take a few minutes to log in and check on them. Doing this can save large majority of the costs and time with probate, providing your family access to money during a tough time.
If you have questions, please don’t hesitate to reach out and talk with us. We are happy to help with this process and help through the next steps. Also, we’ve included our guides on considerations when establishing or updating an estate plan.
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