Estate planning is important, even though thinking about your own death can be difficult. When you create a proper estate plan, you protect your hard-earned assets, your family, and future generations.
Whether you are just beginning the estate planning process or have an established estate plan, it is important to know about various aspects of the system that you and your loved ones may encounter. Probate is a significant aspect of the estate planning system, and it is crucial to understand how it works.
Our team at Stange Law Firm offers reliable information for those looking to begin or update their estate plan.
A Summary of the Probate Process
The probate process is how the government settles a deceased individual’s taxes and debts. In probate court, a judge will assess the deceased’s unpaid or remaining taxes as well as their will’s validity.
If the judge finds a deceased person’s will to be valid, they pass the estate on to the will’s executor. In some cases, the executor has been named in the will. If no executor has been named, the court names one during probate. If the will is invalid, or there was no will, the judge will pass the entire estate to the next of kin.
Enduring Probate Court
Probate court is not only financially cumbersome, but it can also be emotionally taxing as well. Your loved ones will have to endure probate almost immediately after your death to get their inheritances, as the state offers little time for grieving families. The process can be grueling and complicated. It may last weeks or even months.
Unfortunately, taxes and unpaid debts can eliminate a significant amount of an estate. This can leave much less than planned for the beneficiaries. The only way to avoid this is to avoid probate court, which can be done with a trust.
Probate court is only required when a deceased person’s assets must be divided. In a trust, the benefactor puts their assets in an account (the trust). The account is then held by a third-party trustee that has been assigned by the benefactor. When the benefactor dies, the trustee has control of the assets, which avoids probate court because the owner (the trustee) did not die.
Revocable or living trusts allow the benefactor to continue to access their assets and make changes to the trust during their lifetime. They may add or subtract beneficiaries, add or remove assets, and change the terms of inheritances. If money or assets are removed, taxes will be levied on the income.
Irrevocable trusts are the opposite. Once the documents have been signed, the benefactor cannot access their assets or make any changes. However, there may be more tax breaks. These are typical options for those with degenerative diseases, conservatorships, or who are nearing the end of their lives.
Although trusts are subject to their own taxes, they do save money by avoiding probate. This allows the assets to remain in the hands of your loved ones.
Creating an Estate Plan
Whether you want to help your family avoid probate or not, it is important to begin the estate planning process early. Many people believe that they should wait until they are older, but this puts your family at risk. Your assets will be in danger of being taken by the state. They might also be passed on to your next of kin against your wishes.
Once you have significant assets, such as a home or car, or you have children, you should have a will to outline basic instructions for if you pass away. Once you become more established in your career, or reach retirement, it may be advantageous to explore creating a trust.
Q: How Can I Avoid Probate?
A: The most effective way to avoid probate is to create a trust. These accounts do not go through the probate process. It also keeps more assets in your estate that would otherwise be given to the government. However, if a trust is not possible, it is helpful to stay up to date on your taxes and pay your debts. Although your estate will not avoid probate because of this, there will be less taken from it during the process.
Q: What Happens If Someone Dies Without a Will?
A: If someone passes away with no will, the person dies “intestate.” The probate process will proceed and make deductions. After that, all their assets will be given to their next of kin. The next of kin is legally permitted to retain these assets if they choose. They are under no obligation to redistribute them according to what the deceased would have wanted. This puts loved ones, including their children, at risk of losing an inheritance.
Q: What If a Beneficiary Dies?
A: If a beneficiary passes away, and the benefactor does not update their will before their own death, the assets will go to any contingent beneficiaries named in the will. If there are none, then the money will likely be given back to your estate. It will then be redistributed among other beneficiaries.
Q: Do I Need an Attorney to Create an Estate Plan?
A: Although you can technically create an estate plan without an attorney, it is unwise to do so. An attorney can ensure that your account or documents have been properly created. If you engage in the process alone, it is entirely possible for the will to be invalid and for none of your wishes to be met.
Creating a trust is extremely complicated and very important. You should not attempt to create one without an attorney.
Contact Stange Law Firm
For many years, our team has been helping individuals and couples around the Midwest create estate plans that protect their families. Because we also practice family law, we have a deep appreciation for the love that comes at the intersection between estate planning and family law. We can work diligently to help you make the estate planning choices that are right for you and your loved ones.
For more information, or to schedule a consultation, contact Stange Law Firm.