Estate Planning

Estate planning is the most overlooked part of financial management. Many people put off even the most basic steps such as drafting a will.  Often wills to become outdated due to changes in their personal situation and estate tax laws.

An estate consists of all the wealth you have accumulated in your lifetime. This includes real estate, stocks, bonds, mutual funds, business interests, retirement plans, personal effects, and anything else you own or possibly control.

The two primary goals of estate planning are: the management of your wealth in the lifetime, and the distribution of it at your death.

Your estate’s net worth is based on the “fair market value" of all your real and personal property.  Fair market value is defined as the amount someone would be willing to pay for your property, and that you'd be willing to accept, if neither of you were under any pressure to buy or sell the property.

There are five main estate distribution techniques. They are: intestacy, wills, jointly held property, contracts, and trusts.

The first is intestacy, or doing nothing. When you die, the probate court distributes your estate according to the intestacy laws of your state. This does not not take into account how you may have wanted your affairs settled. You will have no control over how your estate is distributed. This could result in un-intended distributions, extra fees and taxes, and additional probate expense.

The most used tool to distribute your estate is a will. A will is a list of instructions that tells the world and  the probate court exactly how you would like your estate distributed.  Properly drafted and executed, it will reduce fees and taxes as well as ensure an efficient probate process.

A commonly used distribution method is jointly held property. This can be in the form of joint tenancy, tenancy in common, or community property. It is impotant to note the holding property in joint tenancy overrides  a will, and gives the property to the surviving joint tenants.  This is done outside of the probate process.

You can also use contracts to pass part of your estate. The proceeds from life insurance, annuity contracts, and pensions will automatically pass to whomever you've designated as your beneficiary.

A Trust is a legal arrangement under which one person or institution controls the property given by another person for a benefit of the third party. The trust can enable you to control the distribution of your estate. A properly structured, trust can help you reduce or avoid many the fees and taxes that will be imposed upon your death they can also keep your estate of the probate court.