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Why an Estate Plan Matters

Wills-trust-estates-bank-beneficiary-trust-trusteesYes, you have an estate—even if it is a humble home and a few bank accounts. “Estate” is a legal term that refers to a person’s possessions. You don’t have to own a country estate to have an estate!

Anyone over age 18 who has any assets,  which could mean a savings account, retirement accounts, a home or a car, has an estate and needs an estate plan to make sure that those possessions are given to family members or friends, according to their wishes upon their death. Another reason for an estate plan, according to this article from CNBC, “How to start thinking about an estate plan,” is to try to prevent your offspring from fighting over assets and to manage any tax liability for your heirs.

Even if your plan is to leave your assets directly to your children, you should consider that not everyone is good with money and there are certain steps you can take to make sure they don't waste it. To help decrease the odds of your kids squandering your money, take a look at these tips for how and when your assets are passed down.

One wise way to distribute your wealth is to leave it to your children via a trust, which can be designed in several different ways. You can set it up so it specifies precisely when assets pass to your beneficiaries (like when they reach age 18, 21, 35, or whenever you choose) and how the money is to be used (like only for education expenses).

A trust can also help your estate avoid probate court and reduce your estate taxes. Another benefit of a trust is that your heirs will be able to access the money, but it will be exempt from creditors. The trust assets are also considered separate from marital property, so if one of your children were to divorce, that money will not end up with an ex-spouse.

There’s also a strategy that allows the money in a 401(k) or IRA to be transferred into an IRA trust. Just like a traditional trust, these assets are protected from bankruptcy, and withdrawals are managed by a trustee. This will keep an heir from treating an inherited IRA like a blank check, when the account owner dies.

Another option when it comes to creating a trust is to have it created under your will.

One important reminder is that the beneficiaries named on financial accounts, such as IRAs, retirement accounts, insurance policies, and brokerage accounts, take precedence over what is in your will. Thus, it’s critical to keep beneficiary designations current.

An experienced estate planning attorney will be able to help you figure out the best way to structure the distribution of your assets for your family and a means of minimizing your estate’s tax liability. You’ll gain peace of mind, knowing that you’ve done the right thing to protect those you love.

Please contact us today to schedule a consultation to discuss creating a personalized estate plan.  

Reference: CNBC (November 21, 2017) “How to start thinking about an estate plan”

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