Protecting family inheritance should be a top priority regardless of owned assets. People often neglect entering into estate planning because they believe they don't own anything of value. Others procrastinate about the task and put it off for a rainy day. The problem is if you die without a last will and testament your family must endure the lengthy process of probate.
Family inheritance can be comprised of cash, personal property, titled property, and valuable assets such as heirloom jewelry or artwork. Regardless of what you own, it's important to establish a record of property and designate beneficiaries to receive items upon death.
Several options exist for bequeathing family inheritance to loved ones. Individuals can write out a last Will, transfer assets to a trust, or gift items while they are still alive. The strategy used depends on estate value and types of inheritance property.
The probate process is the most common estate settlement practice used within the U.S. By law, all estates must undergo probate unless estate assets are transferred into a trust. Probate laws vary by state. Some states exempt estates from probate if the value falls below a certain amount; usually between $25,000 and $50,000.
Individuals with estates valued below $100,000, but more than state exemption levels, can engage in estate planning strategies to keep certain types of assets out of probate. It's best to consult with a probate lawyer or estate planner to ensure proper documents are filed to protect assets.
Some of the most common ways to avoid probate include assigning beneficiaries to receive funds in checking and savings accounts, financial investments, and retirement funds. Account holders can establish beneficiaries for bank accounts by filling out a form at the financial institution where funds are held.
This strategy is referred to as assigning payable on death (POD) beneficiaries because the funds are paid once certain procedures are conducted. The probate personal representative obtains date-of-date value forms which are provided to the County Recorders' office in the decedent's state of residence. This is required to provide evidence that decedents do not owe taxes.
To claim funds beneficiaries are required to provide verified tax statements, along with a copy of the last will and death certificate. On average, the process for claiming POD funds is 30 days.
The same process is used for claiming investment or retirement funds. However, account holders of these types of accounts assign transfer on death (TOD) beneficiaries. Instead of receiving lump sum cash, beneficiaries can transfer funds into a new account under their name.
This strategy allows beneficiaries to avoid paying inheritance tax. TOD beneficiaries can elect to cash-out accounts instead of transferring funds. However, gifted money may be subject to inheritance tax at the state and federal levels.
Titled property, such as real estate, motor vehicles, and watercraft can be gifted to heirs and beneficiaries by establishing joint titles such as Joint Tenants with Rights of Survivorship. To ensure property will transfer according to your wishes it is important to consult with a probate professional as laws surrounding titled inheritance property vary by state.
Trusts are often used when estate assets exceed $100,000 in value. Inheritance trusts should be setup by estate planning lawyers as they are complex and must be in compliance with state and federal laws.
Engaging in estate planning can minimize family disputes over inheritance and provide peace of mind knowing your affairs are in order. No one enjoys thinking about what will happen to their belongings once they are gone, but estate planning is a necessity of life. Without it, estate assets are tied up in probate for months and distributed to heirs according to state probate laws.
We invite you to learn more strategies for protecting family inheritance in our probate and estate planning article library. Here you'll find information and resources for hiring a probate lawyer, settling a probated estate, establishing a trust, and ways to avoid probate.