No matter your age or net worth, you need to make legal arrangements for control of asset distribution after you. In case of death without a will / other legal steps, the assets will be distributed according to the law of the respective state to which the individual belongs.
You can consider gifting to heirs during lifetime. Another option is a will where you name a guardian for your young children. The court will appoint a guardian if you do not name one. The guardian you choose is not obligated to serve.
An estate plan is about more than who gets what, such as, plan for the day when you are not capable of managing your own affairs, make arrangements for heirs who may need guidance, keep details of your estate private and minimize estate taxes.
You may need your spouse’s consent to name someone other than your spouse as the beneficiary of your retirement account.
Probate is the court-supervised process for distributing a person’s assets to their heirs. It involves validation of the will, collection of assets, payment of any debts, expenses, or taxes that are owed, and distribution of the remaining assets according to the instructions in the will.
You can generally designate one or more beneficiaries for your financial accounts, and also name a beneficiary for your vehicle or home in some states. Beneficiary designations trump a will. It is also a good idea to name some secondary beneficiaries. Be sure to review your beneficiary designations regularly.
A trust is a legal arrangement for managing & transferring assets. You create & fund the trust, either during or after your lifetime. You choose a trustee to manage the assets in the trust, who distributes them to your beneficiaries, according to the terms of the trust.
A revocable living trust is one where you can serve as the trustee during your lifetime, retain full control of the trust assets, invest, sell or spend them per your wish. Post your death, your successor trustee manages and distributes the trust assets per your directions.
Federal transfer taxes apply to the transfer of assets made during or after your lifetime that exceed certain exemption limits.
• The gift tax applies to assets transferred during your lifetime
• The estate tax applies to assets transferred after death
• The generation-skipping transfer (GST) tax applies to transfers that skip a generation, such as a gift to your grandchild or to an unrelated person who is more than 37 ½ years younger than you. This tax is in addition to the gift or estate tax.
Planning an estate is a complex task. Do consult an estate planning professional who can review your financial situation, listen to your goals, and customize an estate plan for you. This will save time and money, and ensure transfer of wealth to your heirs in a smooth and tax-efficient manner.