Just as buying the right life insurance is a prudent way to provide protection for your family if you die unexpectedly, so is proper estate planning.
It makes sense to sit down with your estate planner/lawyer while you’re in a good frame of mind (and hopefully in good health) to discuss the future disposition of your assets, and how estate and inheritance taxes should be handled.
You will need to go through a check-list of assets that you’ve acquired or amassed over the years in order to approximate the total value of your estate. You must also consider the impact of inheritance tax on any assets that you pass on to your heirs/beneficiaries. If you fail to take the proper steps and create a will that discloses how you wish your estate to be settled, the federal government (and possibly the state) will step-in after your death and a sizable portion of your assets could be lost to estate and inheritance taxes.
Most people appoint a spouse or responsible adult child to act as the executor (or personal representative) of their estate. It is important to make sure that individual is capable of carrying out your wishes and understands the best course of action to minimize the estate and inheritance tax liability. Once the executor receives your will and the official death certificate, he/she can begin the probate process.
Probate is the legal process undertaken by the court to transfer assets from a deceased person to their beneficiaries. Probate involves the court reviewing and approving the legitimacy of the will (if it exists), and authorizing the transfer of assets. State probate laws determine how the assets in your estate can be legally transferred to your beneficiaries/heirs, and the amount of inheritance tax to which they may be subjected. The probate process may take anywhere from a few months to several years, depending on how large and complicated the estate/will is, the number of beneficiaries, and the amount of estate or inheritance tax due.
The executor of your estate is appointed by you. He/she is responsible and accountable for the following duties:
- Paying creditors, or others you owed money to at the time of your death
- Paying the applicable estate and inheritance taxes
- Contacting the Social Security Administration (as well as your life insurance company, bank, and other financial institutions) and providing documentation regarding your death
- Canceling credit cards, magazine subscriptions, medical/dental appointments, memberships, etc.
- Distributing assets to your heirs and beneficiaries according to the instructions stipulated in your will
It is important for you to consider estate planning tax strategies that can help keep your assets intact and reduce the inheritance tax for your heirs and beneficiaries.