Death is a harsh reality. All our lives we strive to achieve our goals. These goals include a home, a car, a bank balance, stock, jewels, artifacts et al. But what happens to them when one departs from this world.This article does not cater to ‘life after death’ philosophy. I am writing about an issue that gives you a practical insight to life.
Estate planning is necessary not only for millionaires and billionaires but also for every American with assets to his/her credit. Why should our grieving loved ones be subjected to the additional trauma of settling our estate?
In the absence of a will, your assets are distributed based on provincial legislation. This incurs expense in terms of time and money. Also there is no family control over how your assets would be distributed. Thus, you need to understand that it is important to take the matter of estate planning in your hands today.
Step 1: Make An Inventory
You will be surprised at the net value of your wealth. To understand the net value of your possessions, take stock of what you own and assign a value to each item. The home that you paid for with your easy monthly installments or the farm your aunt left you. Other assets would be your vehicles, investments in the stock market, life insurance policies, mutual funds, pension or retirement accounts, jewelry, ownership in a business, art collectibles, bank accounts and CDs.
A real estate expert or an antique appraiser can help you in arriving at correct valuation.
Step 2: Make A Will
A will ensures that your prized possessions go to the beneficiary you designate.
Probate is the process to prove the genuineness of a will in court. The length of probate may vary from a few days to months depending on the state in which you reside. With good estate planning the probate can be minimized or altogether avoided. Some assets like life insurance do not need to go through a probate.
Seeking professional help in estate planning is required especially if you owe estate tax at the time of your death. If you foresee disagreement amongst your heirs, a will helps.
Another scenario is when you have kids from more than one marriage.
Owning property in another state can be a tricky situation. Sometimes to minimize taxes, people establish trusts.
In case your kids are minors, you need to name a guardian who should be above 18 years of age. Speak to the person you want to name as guardian before putting in writing. Also appoint an alternative person.
Name an executor of the will. Typical responsibilities of an executor include:
• Collecting and distributing assets as given in the will.
• Paying taxes and creditor dues
• Canceling credit cards and other subscriptions
• Notifying social security and other agencies of the death
Step 3: Consider Estate Taxes
One can transfer a certain amount during one’s lifetime or at the time of death, free of tax. This is as per the federal gift and estate law.
You can also start giving away your assets to the value of $12,000.00 per year during your lifetime. This too is tax free.
You may also transfer your property to your spouse or establish a bypass trust save tax.
Estate planning is complicated. Professional advice can make things easier for your beneficiaries.