What is estate planning?
Estate planning is the preservation and the distribution of your assets, both during your life and upon your death. It is accomplishing your personal and family goals and easing the management of your financial and legal affairs, as well as minimizing taxes if your estate is large enough for taxes to be of concern. An “estate plan,” generally, refers to the means by which your estate is passed on to your loved ones on your death. Estate planning can be accomplished through a variety of methods, including:
- Revocable Living Trusts
- Last Will and Testament / Probate
- Lifetime Gifting
- Joint Ownership
- Beneficiary Designations
- Life Estates
Problems often arise when people don’t coordinate all of these methods of passing on their estate. To take just one example, a father’s will may say that everything should be equally divided among his children, but if the father creates a joint account with only one of the children “for the sake of convenience,” there could be a fight about whether that account should be put back in the pool with the rest of the property.
What will happen to my property if I die without a will or trust?
If you die without a will or trust, the state determines who will be your ultimate heirs. This distribution plan can be found in the intestacy statute of each state. The applicable state can be either the location of your legal residence (for personal property) or the state in which your assets are located (for real estate).
How is my property transferred if I die intestate?
Probate is the court-supervised public proceeding used to change the title to assets from the name of an individual who has passed away into the name of the living beneficiaries. It is also the process by which creditors of a decedent file claims to collect their debts and where interested parties who have a complaint regarding the deceased can file a complaint (a will contest). Even without a contest, probate can be costly and time consuming.
Can probate be avoided?
Probate can be avoided with proper planning. There are a number of different techniques for doing so which can be used alone or in combination.
Is joint tenancy a substitute for Estate Planning?
When property is held in joint tenancy with rights of survivorship by two or more people, upon the death of one of the owners, all of his or her interest in the property is transferred immediately to the surviving owner. Joint tenancy is not a substitute for estate planning; on the contrary, it is one type of estate planning; however, is not a good way to plan an estate. For married couples, joint ownership does not help to transfer the estate upon the death of the second spouse. And there are numerous problems with putting a child’s name on the title to your property as a joint tenant. One problem is that while it may avoid probate, creditors of the child will be able to reach the joint tenancy property while you are still alive. Adding someone else’s name to your account may also create a taxable gift when none is expected, and may not be consistent with your ultimately desired distribution. Other problems with using joint tenancy with children in estate planning arise if the joint owner dies or becomes disabled prior to your death.