If you own real estate or other assets, you should consider creating an estate plan. While estate planning may seem daunting, a thoughtful estate plan will provide many benefits for you and your loved ones, and it will give you peace of mind.
Estate planning allows you to designate who will receive your hard-earned assets and the purposes for which the assets may be used. When a person dies intestate (without a will), state law dictates how the person's probate estate—the assets titled in his or her name alone without a beneficiary designation—will be distributed. As a consequence, assets, such as real estate, bank accounts, and business interests, may pass to irresponsible or estranged family members or other unintended recipients. Also, without a plan in place, the heirs, who may not get along, may become co-owners of real estate, and it may be difficult to sell the property, even if the heirs are willing to cooperate, as the title company may require each of the heirs' spouses to consent to the sale. A well-drafted estate plan not only establishes the amount or percentage of assets that each surviving beneficiary shall receive, but also identifies contingent beneficiaries. Furthermore, if the plan is drafted correctly, the assets may be protected from the beneficiaries' creditors and spouses (in the event of divorce). Proper estate planning can also help minimize income and death taxes and thereby indirectly increase the amount passing to the beneficiaries.
In your will, you can designate who should serve as the executor, and parents can name guardians for their minor children. Also, powers of attorney allow you to appoint agents to make financial and medical decisions for you during your lifetime if you become incapacitated, and in a power of attorney, you may authorize others to purchase, sell and manage real estate on your behalf.
Estate planning can also help you minimize or avoid probate. For those not familiar, probate is the formal, court-supervised process for administering a decedent's estate. It can be stressful, time-consuming, and expensive. Often, the process takes more than a year, and the attorneys' fees and court costs can add up quickly. In addition, it is a public proceeding. The court filings, which may reveal sensitive personal and financial information, can be accessed by anyone. Without a plan in place, your most valuable assets, including the family home, may be subject to probate. It should also be noted that when a person who owns real estate in multiple states dies without an estate plan, an ancillary probate proceeding may be required (in addition to the primary probate proceeding), as the probate court in the decedent's home state would not have jurisdiction over the out-of-state property. There are many simple estate planning techniques that can be used to avoid probate. For example, you can avoid probate by transferring your assets to a revocable trust. Also, in most states, including Missouri, a beneficiary deed can be used to transfer real estate upon the owner's death without probate.
Originally published by St. Louis REALTORS® Report.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.