Family inheritance is a prized possession that should be protected using estate planning strategies. Financial assets and valuable property can be transferred to direct lineage heirs and future generations through Wills and Trusts, as well as gifted on an annual basis.
Family inheritance is often a touchy subject, but it is important to openly discuss plans with family members prior to death. Many people feel there will be too much conflict if relatives know what they will receive ahead of time. The truth is family disputes over inheritance can be minimized by planning ahead.
Engaging in estate planning isn't difficult or expensive. All that is required is to take inventory of personal assets, financial portfolios, and titled property such as motor vehicles and real estate. Estate planners can advise whether estates can be sufficiently protected by a last will and testament or if a trust is better suited.
When a last will is used, the estate must undergo the probate process. Probate is necessary to pay debts owed by the decedent and transfer assets to heirs and beneficiaries. The process generally takes between 4 and 6 months to complete. During probate, assets are suspended and cannot be distributed until all other processes are complete.
Many states exempt estates from probate when assets are valued below a certain limit. Probate laws vary by state so it is best to retain legal counsel to determine the best protection strategy. Exempt estates typically undergo a 45-day confirmation period and must be protected by a last Will to avoid probate.
Certain assets are exempt from probate when decedents establish transfer on death (TOD) or payable on death (POD) beneficiaries. TOD is available for investment portfolios and retirement accounts, while POD is available for checking and savings accounts.
Titled property can be exempt from probate when beneficiaries are included on the title. This can be accomplished by entering into joint tenants with rights of survivorship for real estate or establishing a joint title for motor vehicles.
When POD, TOD, and joint titles are used property can be transferred to heirs once the estate administrator engages in specific processes. This usually involves obtaining date-of-death value forms from the financial institution where funds are held. DOD forms are submitted to the County Recorder's office to validate that decedents do not owe taxes.
Once validation is provided, the estate administrator submits stamped forms to the bank or credit union where funds or property titles are held. Beneficiaries must provide required I.D. before funds are distributed or titled property is transferred into their name.
Establishing TOD beneficiaries provides opportunity to minimize inheritance tax by transferring assets into a new account. However, beneficiaries also have the option to cash-out the account if desired. When investment accounts are cashed out, funds may be subjected to taxation at state and federal levels.
There are numerous types of trusts, so it is best to consult with an estate planning attorney to determine which is best suited for your needs. Trusts are generally used when overall estate value exceeds $100,000.
While there are do-it-yourself Wills and trust kits, protecting family inheritance is not something you should attempt to do on your own. Invest the money for professional help to ensure assets are properly protected and comply with state and federal laws.
Our estate planning article library offers detailed coverage of Wills and trusts, probate, and ways to avoid probate. Here you will find resources to ensure adequate protection of family inheritance and help sort through the myriad of available options
Published on June 29, 2011 at 02:25 AM