Estate, gift, and trust planning after the loss of a loved one can be difficult, but with the proper guidance the process can go smoothly and efficiently. The key is proper planning to ensure everything is taken care of prior to accident or illness. If you plan correctly, you are able to avoid unnecessary taxes and make sure all of your belongings and wealth go to the individuals you wish.
What Makes Up an Estate?
One of the first questions usually asked is what makes up an estate? Your estate consists of basically everything you own, but that is the simple definition. There is your probate estate, non-probate estate, and gross estate. A probate estate consists of assets one cannot transfer to his or her beneficiaries without court intervention. A non-probate estate is the assets included in the estate that does not require probate. A gross estate, for tax purposes, includes everything a person owned at their time of death. Then the IRS taxes these assets not based on what he or she paid for them, but on their fair market value.
Who Needs Estate Planning?
Another common question asked is who needs estate planning? The answer is everyone! Even if your estate is small, an estate plan allows you to title things correctly and avoid probate. In order to create a well-designed estate plan an attorney, accountant, and financial advisor should all coordinate to make sure everything is planned correctly and in order.
What is a Trust?
One last frequently asked question is, what is a trust? A trust is a document that tells where and when you want your assets to be distributed. There are many different types of trusts but the three most common are testamentary, special needs, and grantor trusts.
- Testamentary trusts are outlined in a will and come in to play after death.
- Special needs trusts are a way to protect assets and provide for a loved one with a disability.
- Grantor trusts are trusts in which the creator of the trust retains one or more powers over the trust and because of this the trust’s income is taxable to the grantor.
If an individual has not left a will, the title of their assets will determine who they will go to. If their title does not spell out a beneficiary, then assets will go to their descendants dependent on the state law in which they live.
Everyone needs an estate plan. Be sure to properly plan and take advantage of the opportunities available. Please reach out to email@example.com at Corrigan Krause with any additional estate, gift, and trust planning questions.