An estate is the property possessed by someone at the time of their death. Estate planning refers to drafting documents such as the wills, trusts, power of attorney and other documents that permit the transfer of property after an individual’s death.
Generally, if a person passes away without a will, then their property would be transferred to their next of kin. However, there are more complexities involving the transfer of the property that vary depending on the state you reside in. If an individual wants to control and decide on how their property is distributed, then it is critical to draft a will specifying the terms of how your property will be managed.
This property can include a person’s house, car, stocks, life insurance, pensions and debt. Generally, people want to preserve their family’s wealth and want to ensure that their property is transferred to their surviving spouses, children or grandchildren.
Some of the estate property can even be distributed to the individual’s desired charity cause. The most basic step in estate planning begins with drafting a will. The other major estate planning tasks include:
- Putting limits on the estate taxes by setting up trust accounts in the name of beneficiaries;
- Creating a guardian for the living dependents;
- Assigning an executor of the estate to handle and manage the terms of the will;
- Making and updating beneficiaries on plans such as life insurance, IRAs and 401(k)s;
- Setting up funeral arrangements;
- Creating an annual gifting to qualified charitable and non-profit organizations to reduce the taxable estate and;
- Setting up the power of attorney (POA) to direct other assets and investments.
There is not necessarily a right time to accomplish all the tasks for estate planning, it is more of an ongoing process and can be started as soon as one has any asset base.
What are the Steps in Drafting a Will?
A will is a legal document formulated to provide instructions on how a person’s property and custody of minor children, if any, should be transferred after their death. The individual expresses their wishes through the document and generally names a trustee or executor to fulfill the stated intentions to a person whom they trust.
Additionally, the will decides whether a trust should be created after death. There are two types of trusts, one that goes into effect during the lifetime of the person, also known as the living trust and the other one that comes after the passing of the person also known as the testamentary trust.
The authenticity of a will is found in a legal process called probate. Probate is the first step taken in administering the estate of a deceased person and distributing assets to the beneficiaries. After an individual’s death, usually the assigned executor of the will can take the will to the probate court within 30 days of the death. It is important to research your local deadlines for the submission of this.
During this probate process, the court determines the validity of the will and its authenticity in regards to it being the last wish of the deceased. After the court determines its validity, it then officially assigns the executor named in the will by the deceased person and gives them the legal power to act on their behalf.
How to Choose the Right Executor?
When drafting the will, one of the most important aspects is selecting the person who will manage and execute your last wishes. This legal representative or the executor becomes the appointed person by the court to oversee all the deceased property.
In compliance with the Internal Revenue Code (IRC), the executor needs to estimate the value of the estate also known as the property left by the deceased by using either the date of death value or the alternative valuation date.
Therefore, a list of assets are needed to be accounted for that include retirement accounts, bank accounts, stocks, real estate property, jewelry, and any other items of value. The courts look to where the deceased lived at the time of death to evaluate which assets are subject to probate administrations. Additional understanding into which property counts towards this, it is useful to seek out legal assistance to answer specific questions regarding each asset.
In addition to any assets left behind by the deceased, the executor also has to pay off any taxes and debt owed from their estate. It is important to adhere to the notifications of when the payments are due and make them in a timely manner. Creditors can file claims for the payments and if any claim is rejected by the executor, it can be taken to court where a probate judge will decide on the claims’s validity.
Lastly, the executor is also responsible for filing the final personal income tax returns on behalf of the deceased. Any outstanding estate taxes will generally come due within nine months of the date of death.
After the executor takes an account of all assets within the estate, their value is calculated. Then once that is completed, the taxes and debt must be paid off. Finally after those tasks are completed, the executor asks permission from the court to get authorization for distributing the remainder of the estate to the beneficiaries.
When Do I Need to Contact a Lawyer for Estate Planning Issues?
Estate planning can be an overwhelming and a long process. Especially if there are many assets to account for. Also drafting a will can require estate planning lawyer expertise to assist with the process to ensure all the necessary last wishes are fulfilled.