Avoiding Probate

Without an established estate plan, your accumulated wealth can be tied up in probate. This can be concerning if you have legacy planning goals. One way to avoid the probate process and ensure your beneficiaries receive your assets according to your wishes is to craft a well-considered estate plan.

 

Broadly speaking, estate planning is the process of structuring your assets to provide maximum efficiency when transferring to heirs at minimum expense and effort. Without a properly shaped estate plan, your financial wishes may not be fulfilled, and your beneficiaries could be needlessly burdened. Although the basics of estate planning are sometimes as simple as designating beneficiaries in wills and on policy forms, the actual mechanics of transferring wealth to the next generation can be quite tricky.

 

Why is Estate Planning Important?

It may seem that estate planning is only a concern for the wealthiest of the wealthy. While most estates won’t be subject to the current estate tax rate, individuals still need to think about the impact of taxation on their assets issued to beneficiaries. This is because received assets will generally be subject to ordinary income tax, which can whittle significant amounts away from the accumulated value of an estate.

 

Certainly, different asset types will be taxed differently, but someone’s life wealth can be reduced—in some cases by nearly half—through ordinary income taxes. This gets more complicated when the asset is not monetary, but rather physical, such as property, land, or houses. For many individuals that work hard their entire lives to leave wealth to their heirs, the prospect of this can be unsettling.

 

Thankfully, many strategies can minimize the tax burden heirs may face. This can involve things like annuities, trusts, and life insurance policies, all structured to ensure beneficiaries receive the maximum possible upon transfer. To establish an estate plan that works in concert with your specific retirement plan, assets, and legacy goals, you should seek out as a financial advisor that provides a guiding hand.