4,876,138, that’s the total number of deaths (worldwide) that are directly related to COVID-19. Pandemics are horrible, and COVID-19 is no exception. Such heavy casualties make many of us ask ourselves, “what if it were me?”
What if it was?
45% of young Americans do not currently have a will or any type of estate planning in place.
What will happen to your family and your assets if something tragic takes you from them?
If you’re unfamiliar with estate planning, you’ve come to the right place. In this article, we’ll discuss estate planning and asset protection and how to make them work for you.
If you’re ready to discuss options now, we can help. Click here to get in touch with us.
What is Estate Planning?
To put it simply, estate planning is making an official plan for the distribution of your assets after your passing or if you’re incapacitated.
The term – yes, there’s a term – for dying without a will is intestate. That’s also what will happen to your assets in that event.
Without a will or other estate planning document, the descent and distribution laws of the state you lived in at the time of your death will determine how your estate or assets get distributed.
That’s the simple explanation, but good estate planning can and should be so much more.
Good estate planning can:
- Name a guardian for your children and their inheritance
- Provide for any loved ones with special needs in a way that doesn’t disqualify them from government benefits
- Give some guidance on spending for loved ones that might not be the best at managing their finances
- Direct the transfer of your business at defined points (i.e., retirement, death, incapacitation, etc.)
- Minimize taxes and other unnecessary legal fees
- Instruct the direction of your care and financial affairs if you become incapacitated before your death
- And more!
Estate planning should be an active part of your personal finance review and should be discussed with your legal representative and reevaluated regularly.
When There’s a Will, There’s a Way
Estate planning typically starts with drafting one of three documents:
The standard will is the most common type of estate planning document because, for many people, a will adequately cover the distribution of their assets.
But for some people (i.e., those with larger landholdings), a will won’t provide the necessary structure to ensure that the instructions are carried out as outlined.
For those with larger estates or who expect a disability (i.e., those who are terminally ill), trusts provide the support that wills can’t. A trust is a legal arrangement that separates an asset or property from the collective estate and places it in the care, or “trust,” of a named Trustee who manages this Trust for the named beneficiary.
The main difference between wills and trusts is the timing of the distribution of assets. Wills determine beneficiaries after the benefactor passes, and trusts take effect as soon as they’re enacted (“living trusts”).
How Do I Know Which One I Need?
Choosing the governing document for your estate should be discussed with your legal advisor, who can give you information specific to your situation and what you want to do.
If you’re unsure and would like to talk more about your options, we want to help! Send us a message by clicking here or give us a call anytime at (912) 352-3999.
Estate Planning vs. Asset Protection
You may be wondering, “what is asset protection?” There really is no “versus” between the two, they both represent estate planning solutions to protect you, your loved ones, and your assets. Just like wills and trusts, the difference comes down to the timing.
Types of Asset Protection
Estate Planning provides for protection after death, and asset protection provides for protection as soon as the appropriate instrument or document has been determined.
Common forms of asset protection include, but are not limited to:
These are trusts with terms that cannot be changed once the document is executed. This option can minimize estate tax, protect the asset or property from creditors, and give you peace of mind that any minors or other loved ones with special needs will be provided for.
Limited Liability Companies
A Limited Liability Company (LLC) protects business owners’ personal property in the event that their company runs into any credit or legal issues.
Family Limited Partnerships
Often used in situations where minors are involved, a Family Limited Partnership (FLP) creates a holding company to retain business interests and other assets. FLPs provide protection from creditors and can minimize estate tax, just like a trust, but allow the parties forming the FLP to retain control over the assets placed within it.
Auto, homeowner, rental, and commercial liability are just a few examples of the kinds of insurance that can be put in place to keep your assets safe.
Mistakes to Avoid
There are many potential mistakes and missteps that could lead to misinterpretation, delay, or in the worst-case scenario, an overturning of your will, so take care to avoid that kind of hassle.
Here are a few of the common mistakes made by folks during the estate planning process:
- No official plan
- Not reevaluating the plan
- Not making arrangements for disability, incapacitation, or long-term care
- Improper ownership of assets
- Not including charitable gifts
- Not appointing a guardian for anyone in their care that may need one
- Misunderstanding taxes and their effect on the process
- Problems with liquid assets
- Not taking advantage of tax advantages while they are living
- Putting their child or children’s name(s) on a deed to property (as that could result in huge tax liabilities)
Happy Endings Start at Home
Our mortality is a sensitive subject for most of us, and we understand that it isn’t the easiest dinner table discussion. That said, a discussion with your family about estate planning and asset protection is necessary.
Let Us Help!
Sometimes difficult conversations are made easier with the buffer of a third party. Let our team at Smith Barid LLC be your and your loved ones’ guides through the labyrinth of options and obstacles of estate planning.
Since 2006, we’ve been taking care of families and their assets, providing individually customized solutions for their unique and very personal needs. Let us take care of you and your family. Click here to send us a message or give us a call anytime at (912) 352-3999.