You’ve worked hard your entire life to build a career, raise a family and accumulate assets. Now it’s time to think about how you will pass your legacy on to the next generation of loved ones. You likely want to maximize the amount of assets that actually end up in the hands of your heirs.
A will is a good starting point. It serves as an essential document to guide your heirs and the local probate court in the distribution of your estate. However, a will doesn’t reduce or avoid the probate process, which can delay the distribution of your assets and even generate costs that drain assets from your estate.
Probate is the legal process by which an estate is settled. During probate, the court and your estate executor will file your final tax return, identify all heirs, pay debts and bills, liquidate assets and more. It can be a time-consuming and expensive process, and often it must be complete before assets are dispersed.
If you want to maximize your legacy and get your assets in the hands of your heirs quickly, minimizing exposure to probate is one way to do so. Fortunately, there are a few different ways to minimize the impact of probate or to avoid it altogether. Below are three common ways to do so:
Assets and accounts that have a beneficiary designation are paid directly to the specified beneficiary and avoid the probate process. This includes things like 401(k) plans, IRAs, life insurance, annuities and more.
You can use these tools to pass assets to heirs and bypass probate. However, make sure your beneficiaries on each account are up-to-date. If a beneficiary is somehow left off an account, they usually have no legal recourse to recover their share.
Another option is to name a joint owner on an account or asset. If you know you want a specific asset to go to a certain heir, you can name them as your joint owner on that asset. Then, when you die, the asset transfers directly to them.
One point of caution, though. When you name a joint owner, they immediately get all rights of ownership. That means taking withdrawals, making investment decisions and more. Be sure you trust your joint owner before taking this action.
A trust is another effective and flexible way to minimize probate. Trusts have beneficiaries, so the assets in a trust are distributed according to the instructions in the document. The assets bypass the probate process completely.
A trust can also be useful in controlling your assets and how they are distributed. You can specify when they are passed to heirs, how the distribution happens and even how the assets are managed. There are many different types of trusts, so be sure to consult with a professional before moving forward with this strategy.
Are you thinking about how best to transfer your estate and maximize your legacy? We can help. Contact us at Jerry Adams Financial Strategies. We can help you develop an estate plan that honors your wishes and directs your legacy to those you love. Let’s connect today.
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