Monday, 13 July 2020

You've heard the horror stories: A high-net-worth individual dies without an estate plan, and his family members watch his hard-earned dollars go to the government, while relatives bicker in probate court about who should get what. These situations typically take years to settle.

Tales like this are scary because they are so often true. But nobody's hard-earned fortune has to be divvied up in court, open to the public, and subject to high inheritance taxes.

By taking some time to plan ahead for how you want your assets to be distributed to your heirs, you can avoid leaving this personal task up to the state. But when individuals don't make plans for their estate in advance, state laws will dictate how their assets will be distributed.

Creating an estate plan can be helpful for avoiding probate, minimizing the tax burden on your heirs and ensuring that your wishes for your assets are followed upon your death. You can start developing a plan by answering a couple of important questions.

Will your possessions be subject to estate taxes?

Start by calculating your net worth and determining whether your estate would be subject to estate taxes if you were to pass away unexpectedly. The IRS offers guidance on the size of estates that are required to pay the estate tax.

Each state varies regarding rules for estate taxes, so it's wise to check on the laws in your state. If you determine that your heirs would be required to pay significant estate taxes, you may want to take steps to avoid or minimize those obligations. A qualified estate planning attorney can help you choose the best way to do this.

You can avoid estate taxes by establishing an irrevocable trust, which takes ownership of your assets until your death and then divvies them up as you've specified. You could also give your assets as gifts during your lifetime so heirs can avoid paying estate taxes.

If you're married, you can share ownership of all assets with your spouse. This is known as joint tenancy with rights of survivorship. That way, when you die, your spouse already owns all your property and doesn't have to pay estate taxes. But the last surviving spouse will have to come up with another plan for avoiding estate taxes after his or her death.

How would you like your estate divided?

Most people want to ensure that certain people receive specific properties, funds or other belongings after their death. The key is to plan ahead so your estate doesn't end up in probate.

Your estate planning attorney can help you determine whether a Last Will and Testament or a revocable living trust is the best option for making your wishes known about the division of your property. Both of these documents can detail your plans for your assets, but a revocable living trust is especially helpful if you own a business or have a particularly complicated estate. A revocable living trust is also ideal if you're especially concerned about keeping your estate's affairs private.


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