An estate consists of the assets you own at any given time. It is your estate that you will leave behind after you pass away. Estate planning is the process of providing for the appropriate distribution of the assets that will comprise your estate in the event of your death.
Many people will think about estate planning and immediately equate it to the execution of a last will. A last will is utilized to express your final wishes with regard to the distribution of your assets.
When you draw up a will you must also choose a personal representative (historically, called an executor or executrix). This is the individual that will administer the estate.
You should choose your personal representative wisely because it is not just a ceremonial role. The personal representative must guide the estate through the process of probate. During probate final debts must be settled, and property must be inventoried and in some cases liquidated before it is divided and distributed among the heirs of the estate.
Because of the business that must be conducted the personal representative should be someone who is comfortable taking care of these tasks. There could be a good bit of time involved so you should also select someone who has the time to do the job.
A last will is not your only option for transferring assets at your death. Because wills must be probated through the courts and probate is time-consuming many people choose to avoid it by arranging for asset transfers using methods other than a last will.
A popular choice for probate avoidance is a revocable living trust. With these trusts you retain control of the assets while you are alive by acting as both the trustee and the beneficiary.
After you pass away, a successor trustee distributes assets to the beneficiaries that you choose according to your wishes. These asset distributions take place outside of the probate court.
There are other types of trusts that can be used beyond revocable living trusts. The correct choices vary on a case-by-case basis depending on the objective of the person creating the estate plan.
People who are in possession of considerable wealth have to concern themselves with the federal estate tax. This tax carries a 40% rate , and in 2013, the amount of the exclusion is $5.25 million.
It is possible to position your assets in a way that mitigates your estate tax exposure if you work with a licensed estate planning attorney.
In addition to the estate tax concerns, other estate planning objectives include asset protection, special needs planning, and spendthrift protections.
Every responsible adult should have an estate plan in place. This is something that you are doing for the benefit of your loved ones, and you could be leaving a potentially difficult situation behind if you don't take the appropriate steps in advance.