Do you have a legacy that you want to leave for your loved ones after you pass way? You’ve probably worked hard to build an estate that includes investments, cash, retirement accounts, real estate and even personal property. As you approach the later years of your life, you may be thinking about how to distribute them to your family.
Unfortunately, some of your assets may not go to your heirs. Many estates face a substantial amount of costs, like legal fees and administrative expenses. These costs can erode your legacy and reduce the amount of assets that are passed to your loved ones. Your family may end up with only a fraction of your estate.
The good news is there are steps you can take to maximize the amount of assets that are passed on to your family. Below are a few tips to consider as part of your legacy plan to minimize legal and administrative expenses:
Create a will or trust.
A will is an essential estate planning document. It provides instructions on which loved ones should receive which specific assets. Without a will, the court will decide who receives your assets. That could involve numerous court proceedings, a prolonged legal process and substantial fees. You can avoid much of that cost by creating a will.
Even though a will is critical to your estate, many Americans don’t have one. A recent study found that almost two-thirds of Americans don’t have a will.1 If you haven’t created one, now may be the time to do so.
Even if you have a will, some of your estate may have to go through the probate process. During probate, your executor will file final tax returns, pay off debts, notify heirs and more. There are costs associated with many of the common tasks in probate.
You can use a trust to minimize the amount of assets that pass through probate. Any assets held in a trust pass directly to the trust beneficiaries without going through probate or any other court functions. That can help you protect your assets and avoid unnecessary expenses.
Make sure your beneficiaries are up to date.
You may own assets that have a beneficiary designation. These usually include things such as life insurance, qualified retirement accounts, annuities or others. With these assets, the funds are paid directly to your named beneficiaries instead of going through probate.
If you don’t have beneficiaries on these accounts, however, or if your beneficiaries are deceased, the assets are paid into your estate. That means they go through probate just like assets that are governed by your will. Check to make sure you have the correct beneficiary designations so you can keep assets out of probate.
Consider a Roth IRA.
Do you hold assets in a traditional IRA or a 401(k)? These accounts are popular because they allow you to grow assets for retirement in a tax-deferred manner. However, that means all distributions, including death benefit payouts, are taxed as income. Your beneficiaries could face a sizable tax bill on their share of your qualified retirement accounts.
You can eliminate that tax bill with a Roth IRA. A Roth IRA still has tax-deferred growth, but it also offers tax-free distributions, assuming you are disabled, dead or over age 59½. Upon your death, your beneficiaries receive their share of the account tax-free.
Ready to develop your estate plan? Let’s talk about it. Contact us today at Stoll and Basler Financial Services. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
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