What is Estate Planning? What Do I Need to Know About It?
Mar 7, 2017
Estate planning can be a difficult subject to bring up with aging loved ones, but just as with end-of-life care, health care directives, and other important topics, it must be discussed nonetheless.
In this simple guide, we’ll go over the basics about what estate planning is, how to avoid going into probate, and how to get started when you’re beginning to plan for the future of your estate, or for that of your loved one.
Why Is Estate Planning Important?
Estate planning is important because it makes things easier for you, your loved ones, and your family. If your loved one dies without a will, or without a clear plan for their estate, things are going to get very complex, very quickly – and the last thing you want to do after losing a loved one is spend weeks – or even months – poring over financial and legal documentation.
By implementing proper estate planning through documents like wills and clear powers of attorney, things become far less complex. If a will has a clear executor and strong language defining who will receive property, the process of distributing assets and dealing with the death of a loved one becomes much easier.
What Happens When an Estate Goes Into Probate?
The “probate process” simply refers to the legal process by which a will is verified, the decedent (individual who has died) transfers property to heirs and beneficiaries, and settle any debts or other outstanding expenses the individual may have had. Generally, this is a 4-step process:
A petition is filed, and notice given to heirs and beneficiaries – If a will is present, the will is submitted to the court, and the executor is chosen. If a will is not present, an executor is chosen by the state.
After being appointed by court, the personal representative of the decedent must give notice to all relevant creditors of the estate, and take inventory of the estate property – Notice must be given to all creditors as pertinent to state law, and a full inventory of all the decedent’s assets is taken.
All estate expenses, funeral expenses, debts, and taxes are paid by the estate – Whichever creditors have legitimate claims are paid from the estate, with the personal representative of the estate liquidating assets, if necessary.
The legal property of the decedent is transferred, according to the will or to intestate adjudication – Assets are transferred to beneficiaries either according to the will and testament of the decedent, or according to state succession laws if the decedent was intestate (lacked a will) at the time of death.
This process is very common, but some still wish to avoid it, as it can be very time consuming and difficult to deal with after the death of a loved one.
How Can I Avoid Probate?
There are 3 basic ways you can avoid the probate process.
A living trust – as opposed to a last will and testament, a living trust places the assets of a decedent in “trust” after death – and these assets are then managed by a trustee for the benefit of all relevant beneficiaries. Because assets are already distributed to the trust after death, there’s no need to go through the probate process, and many taxes and fees can be avoided.
Name beneficiaries on important accounts – You can avoid the probate process on some assets by naming death beneficiaries on important accounts – IRAs, 401K plans, life insurance policies, pensions, stocks, and bonds, among others. Since these assets will have directly-named beneficiaries, they won’t have to go through the probate process, which will simplify things, and lead to fewer fees and taxes.
Joint tenancy with right of survivorship – Holding property jointly is a great way to avoid it passing through probate. If one member of a couple who hold joint ownership of a property dies, full rights are immediately passed to the surviving couple, avoiding probate court entirely.
If you do not wish for an estate to go into probate, any variety of these three methods can be used – as well as the recommendations of your estate planning lawyer.
Should I Consult with A Lawyer?
A pinch of prevention is worth an ounce of cure – and that’s true of legal documents.
Consulting with an experienced estate planning lawyer may not be cheap, but estate planning lawyers can help you and your loved one draw up a clear will or trust, provide documentation about plans for your estate and properties, and give you a clear path forward that will help you the avoid legal headaches that can occur when you don’t have an estate plan.
So, read through the above information, find a great estate planning lawyer near you, and schedule an informational session. You and your loved ones will have peace of mind, knowing that your estate or that of your aging relative will be administered properly after death.