Estate Planning: 4 Ways to Protect Your Family’s Future
What will happen to your loved ones when you pass away? Your will may no longer be sufficient to ensure that your family will receive their rightful inheritance. If you don’t plan properly, your estate could be subject to a set of time-consuming and expensive legal procedures, known as probate. Depending on the state where you live, probate can cost your estate 5 percent or more in legal fees and can last 2 years or more. You can avoid probate if you consider these four tips.
1. Set up a living trust.
A living trust is a legal document that holds assets for your benefit and for your beneficiaries. It’s managed by one or more trustees who are legally responsible for operating the trust according to your wishes. In order to avoid probate, transfer the title of all your assets, such as bank accounts, bonds and other holdings, to the trust and make new purchases in the name of the trust. After you pass away, the assets in the trust are distributed directly to your beneficiaries, which saves you money in estate settlement. In addition, your beneficiaries will have quick access to the trust’s funds. However, living trusts do not protect your assetsfrom estate taxes.
2. Have joint tenancy on your property.
Joint tenancy allows you, and others that you specify, to own equal shares of your property. When a joint tenant dies, the property is automatically passed to the surviving tenant or tenants without going through probate. You can have joint tenancy in real estate property, as well as, bank accounts and securities. A will or a living trust has no effect on joint tenancy property.
3. Set up payable-on-death accounts.
You can set up your bank accounts with a payable-on-death designation. Upon your death, the person you named to inherit the money can claim it directly from the bank, without going through probate. In the meantime, you have total control of your money.
4. Name a beneficiary for your retirement accounts.
Consider designating a beneficiary for all of your retirement accounts, such as Individual Retirement Accounts (IRAs), 401(k) plans and pensions. By doing so, any money left in these accounts will automatically belong to your beneficiary. You can protect your family’s financial future, if you plan properly.