When you think about estate planning you probably have some idea of what it is. Perhaps you think it is something only wealthy people need to do, or you may think you have plenty of time to create one. Regardless, an estate plan is important, regardless of income bracket or age.
At AmeriEstate, we feel you should have the information you need to make crucial decisions about your future in order to protect your assets. Here are five things you might not know about estate planning that may help you decide whether now is the right time to create yours.
1. A Will Won’t Prevent Probate
A last will and testament establishes your wishes for how you would like to allocate specific assets. You identify your heirs and indicate what you want them to receive. However, you should be aware that if you have life insurance, retirement and annuities, the beneficiaries you named on those accounts receive the benefits, even if you leave them to another party in your will. If you have dependent children, you should name who you want as their guardian.
Wills are public information, and anyone can contest what’s in them. A will must go through the probate process, and the judge has the final say in who receives your assets and how much. Without a will, the courts also determine who gains guardianship of your children. Additionally, the probate process is often lengthy and expensive.
2. It’s Often Better to Gift After Death
If you have highly appreciated assets, you might want to hold off gifting them to your heirs until after you pass. These assets could include real estate, stocks, bonds, art, cryptocurrency, or any other high-value property likely to continue to appreciate.
When you give any of these to a loved one while you are still alive, the loved one assumes the item’s base value. The federal government and most state governments levy a capital gains tax. The federal tax rate is usually 15% or 20% on the difference between the purchase value and the amount the property sells for.
If your loved one sells the property, they may have to pay a higher capital gains tax than if you bequeath the asset after you pass. When your loved ones receive the asset as an inheritance, the base cost is reset to the asset’s value at the time of your death.
3. A Living Trust Offers Protection in Life and Death
A living trust protects your assets while you are alive and after you pass, but it does so much more than that. With a living trust, you can establish the following:
- Privacy in the handling of your assets
- Your wishes for end-of-life decisions
- Who acts on your behalf if you become incapacitated
- Protection from lawsuits for your business
- How to allocate assets when you pass
Another benefit of a living trust is that it saves your loved ones from the probate process and the associated costs and time.
4. An Estate Plan Isn’t Just About Asset Allocation
Creating an estate plan gives you control over more than what happens to your assets after you pass. AmeriEstate attorneys can help you with legal documentation for naming medical and financial powers of attorney who will carry out your healthcare wishes and handle your financial affairs if you become incapacitated. Long-term care and insurance planning are other essential elements of an estate plan.
5. An Estate Plan Is a Living Document
An estate plan isn’t a set-it-and-forget-it process. It’s a living document that requires review, maintenance, and updating as your needs, desires, goals and situations change.
Get Started on Your Estate Plan
It’s never too early to create an estate plan. Getting started now ensures you protect yourself, your loved ones and your assets should the unthinkable become a reality sooner than you expect. Get in touch today to find out how AmeriEstate can help.