Estate Planning PDF
Estate Planning PDF
Estate Planning PDF
What happens to your property when you die, whether its your home, your bank account or the set of china handed down from your grandmother, depends on the decisions you makeor dont makeahead of time. The process of making these decisions and putting them into legal documents is called estate planning. Why Its Important
Your estate consists of the property (assets) you own when you die. You probably have done some estate planning already, even if you didnt realize it. When you created a joint bank or brokerage account, named a beneficiary on a life insurance policy, or bought a house (perhaps with someone else), you were planning how that asset will be distributed when you die. You do estate planning when you transfer property to a living trust. Just about everything else that you own in your name is probate property. If you die without leaving clear instructions about your property in a will, state law will determine how your probate property is distributed to your heirs. This may, or may not, be the way you want to divide your property. Probate is the court process that determines who gets your probate property, if you dont have a will, or makes sure that your probate property is distributed as you stated in your will, if you have a will. Pretty much everyone needs to do some estate planning. Here are some reasons why: To make sure your property goes where you want it to go, whether its to your family, friends, or to a charitable organization. To avoid family disputes about who should receive your property. To legally minimize the taxes on the inheritance. In general, the more assets you have, and the more members in your family, the more important it is to develop a formal estate plan, probably with the help of a lawyer. Your estate plan covers how much you own in each of your assets, what beneficiary designations you want, if you need to create a will, or if any of your property should be held in trust.
Probate Property
(What Gets Transferred in Your Will) Property you hold in your name alone Property you own with someone else as tenant in common Life insurance paid to your estate In community property states, your deceased spouses share of marital property
Non-Probate Property
(What Gets Transferred Directly Without a Will) Property you own with someone else in joint tenancy with right of survivorship Joint bank or brokerage accounts Pay on Demand bank accounts Transfer on Death securities or other investments Life insurance paid to another individual or organization Property in trust Property in a life estate
Getting Started
Start by making a list of all of your assets and how you own them. If you own property with someone elsesuch as a spouse, children or a business partnermake a note of that. One place you can start is to complete the Retirement Planning Assets Worksheet, www.retireplan.about.com/od/ tutorialsandquizzes/l/Assetsworksheet.pdf.
Designating Beneficiaries
One way to assure that your property goes to the people you want is to simply have the property automatically transferred when you die. If you have a 401(k), an IRA or other retirement accounts, fill out the beneficiary designation form. If you do not name a beneficiary for your IRA, the money will automatically go to your estate and will be distributed according to the terms of your will, which potentially can have some significant adverse tax consequences. To transfer a bank account to a beneficiary on your death, request a Pay-on-Death (POD) account; for stocks and bonds or investments at a brokerage house, request a Transfer-on-Death (TOD) registration.
your will, you must appoint an executor or personal representative to administer your probate estate. You can appoint guardians for your minor children and make gifts to charities. To avoid family disputes over who gets all the nice items of personal property, its a good idea to prepare a list of who gets what. This should be signed, dated and kept with your will. If you change your mind, you can write a new list. Just be sure you destroy all prior lists to avoid confusion!
Living Trusts
Setting up a living trust is more complicated and expensive than writing a will, but it may be a good idea if you have a lot of assets, such as homes in more than one state, or large bank or investment accounts. When you create a trust while youre still alive, you put the assets you select into a separate legal entity, administered by a trustee that you choose. As long as youre alive, you can instruct the trustee on how to manage your assets, remove property from the trust, and change beneficiaries. The trustee can also manage your assets if you become incapacitated. When you die, the property goes directly to your named beneficiaries.
Your Will
For any property you own without a named beneficiary, or for property not jointly owned, you will need a will. A will is a statement signed by you that lists your property and the individuals(s) or group(s) you want to receive your probate property when you die. In
This and other tip sheets provide general financial information; it is not meant to substitute for, or to supersede, professional or legal advice. AARP 2007.
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