Everybody knows what a will is, but how about estate planning? Does anyone think to protect the family and assets before passing?
Some say that estate planning does not apply to their situation. Doesn’t the estate owner have to be in the top 2% of the nation’s wealthiest people to have an estate tax imposed on the value of the inherent property?
The answer is yes, but there are other situations in which inherent assets can be diminished during the life of the estate owner, or become problematic after the death of the estate owner.
Estate planning is important for everyone
The purpose of estate planning is to protect assets and make sure the assets are directed to the chosen beneficiaries.
One of the ways a wealth asset can diminish during the estate owner’s life is by lawsuits. If the estate owner is ever in a car accident or someone slips and falls on the owner’s property, these unexpected mishaps can trigger lawsuits and diminish the value of the estate.
Avoid Probating Assets
Another situation in which estate planning could be useful is if the estate owner does not want assets to be probated after death.
Probating assets after the death of an estate owner could be costly and diminish the inherent assets. Fees can diminish the estate value anywhere from 3% to 10%, taking a sizable amount of the assets.
The probate process can be lengthy, taking an average of 7 months to a year. In that time, beneficiaries must take the time to attend court hearings, meet with attorneys, and gather paperwork.
Privacy is another factor to avoid probate by estate planning. Because probate is a legal proceeding, everything is a matter of public record and that transparency may not be desired.
Estate planning techniques
Transference of Ownership
This can be done in a couple of ways. For any property that an estate owner would want a beneficiary to have, the title can be transferred to the beneficiary before death.
The other way to transfer ownership before death is to gift money to the beneficiaries. According to U.S. News & World Report,
“As of 2020, the IRS allows individuals to give up to $15,000 per person per year in gifts.”
Trusts can be set up in different ways, but the point is that the assets will be distributed by an appointed trustee in the way the estate owner sees fit.
Supplementing wills with estate planning makes for a worry-free asset protection system.