Estate Planning: Protecting Your Assets for the Next Generation

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Estate planning is a critical component to protecting your assets for the next generation. Maneuvering through the complexities of estate planning can seem frightening. Fortunately, there are plenty of strategies available that will ensure your estate is administered properly and according to your preferences. 

From trusts and wills to Power of Attorney, we’ll delve into estate planning and provide actionable tips. Whether you’re new to estate planning to protect assets or you want to update an existing plan, this guide will give you the knowledge necessary to secure a stable financial future for your beneficiaries.

What is Estate Planning?

Estate planning is preparing for the future ahead of time. It involves naming the people whom you want to be the recipients of your assets and other valuable items if you pass away or become incapacitated. With a well-crafted estate plan, you can make sure that your beneficiaries and heirs will receive your assets while minimizing tax implications such as gift taxes and estate taxes.  

Estate Planning Strategies

When it comes to protecting your assets, estate planning is an essential part of the process. A broad estate plan ensures that your assets are dispersed based on your wishes after you pass away, as well as provides tax benefits to shield your beneficiaries from legal hurdles. From wills and trusts to powers of attorney, we’ll explain a range of strategies that can help you create an effective estate plan.  

Wills

Include a will in your estate to protect assets. A will lays out a set of instructions and clearly communicates your wishes. It includes vital information such as beneficiaries, executors of the will, and guardians if there are minor children. The authenticity of this legal document is established through the probate process, which is the first step in estate administration. PROS:

• You can decide on who will receive assets from the estate.
• You can include a trust in the will.
• You can avoid feuding among family members.

CONS:

• You will likely have to go through probate.
• The record is public.
• Your estate may be vulnerable to tax implications.

 

Trusts

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A trust is an arrangement that ensures your assets will go to the intended beneficiaries at some point in time. You will allow another party, known as a trustee, to safeguard assets on behalf of the beneficiaries. Trusts do not go through probate, which means beneficiaries can often acquire assets faster than if you created a will. A trust fund is an account where your assets such as stocks, bonds, bank accounts, and real estate can be held. There are two main categories of trusts that you can choose from based on your unique needs. Revocable trusts: These trusts are also known as living trusts and are generated during the grantor’s course of life for situations such as incapacitation planning and avoiding probate. With a revocable trust, you can adjust assets and beneficiaries providing that you’re living and you’re mentally able to do so.  Irrevocable trusts: These are typically used to decrease estate taxes for beneficiaries. Irrevocable trusts are often utilized to accept and hold assets following a grantor’s death. Keep in mind that these trusts are permanent once signed. Pros: 

• You have control over the terms.
• Your assets will not have to go through probate. 
• Since trusts avoid probate, beneficiaries often acquire the assets quickly. 

Cons: 

• There’s a considerable cost involved with hiring an estate planning attorney to establish a trust. 
• Trusts must contain a certain language to have validity, otherwise, they can be upended in court. 
• Taxes may be challenging, particularly because certain trusts must file their own taxes.

Power of Attorney

A Power of Attorney is a critical component of estate planning. By having a POA, you’ll be able to designate another individual to act on your behalf for life decisions if you become incapacitated. There are several different types of POA and choosing the most suitable one depends on your situation. The types of POA’s are below: 

• Financial Power of Attorney
• General Power of Attorney
• Special Power of Attorney
• Durable Power of Attorney
• Healthcare Power of Attorney
• Springing Power of Attorney

Pros: 

• Avoids the need for guardianship.
• You’re able to choose who will make decisions on your behalf 
• You can discuss wishes with family members. 

Cons: 

• The person designated as POA may not act in good faith.
• There’s no court supervision. 
• It ends upon death. 

Beneficiary Designation

When you designate a beneficiary, you are selecting someone who will acquire your assets once you pass away. Some of the most common assets include retirement accounts, life insurance policies, and other financial accounts. You can name multiple beneficiaries and the assets will be divided. Here is who you can designate as a beneficiary: 

• Children or other family members
• Spouse
• Estate
• Charity
• Trust

Pros: 

• Assets can be distributed to the intended beneficiary without going through probate.
• Easy to create and simple to change.

Cons: 

• Outdated beneficiary designations.
• Designations are not suitable for all types of assets. 

Tax Planning

Estate tax planning is an important part of safeguarding your financial legacy. Tax planning involves managing and positioning your assets in such a way that it reduces estate tax implications on your beneficiaries once you pass away.  The rates for estate tax are from 18% to 40% depending on the value of the taxable estate. The unified credit is a federal estate tax exemption that enables an amount of assets to be tax-free. As of 2022, the amount is $12,060,000. 

Takeaway

Most people think estate planning is only for the wealthy, but it’s actually for everybody. Even if you own just a few assets, it’s a great way to distribute those assets prior to and after your death. While some estate planning approaches are fairly simple, there are certain items such as trusts that must be done with precision. If you want to protect your assets for the next generation, estate planning should be at the top of your to-do list.  Sandyside Senior Living is committed to providing top-notch senior care services. Our skilled team specializes in caring for seniors with conditions ranging from Parkinson’s to dementia. If you’re interested in learning more about Sandyside, contact us online or call 248-698-3700.

Sandyside Senior Living

This information was provided by Sandyside Senior Living in White Lake, Michigan. Sandyside specializes in advanced care for seniors with dementia, Parkinson’s, and all age-related illness.

Interested in learning more about Sandyside Senior Living? Contact Sandyside online, or call at (248) 698-3700.