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Think you don’t have an estate? Think again. An estate is made up of everything you own, as well as any digital records. Your home, car, retirement plan, life insurance policy, bank accounts, rights and licenses, even your social media accounts — they all make up your estate.
Generally speaking, your estate plan is the record of how you want your estate disbursed when you die. However, there’s much more to estate planning than that.
Estate planning has a lot benefits. They include:
In most cases, estate planning begins with a will. A properly executed will should accomplish the following: makes your wishes legal and helps your heirs handle your estate; documents who will receive specified property upon your death; names guardians for your children should both you and your spouse die before your children turn 18; and appoints an executor, who is in charge of executing the orders of the will.
Only 44% of Americans say they have a will, according to 2016 Gallop data, which is down from 51% in 2005. While that number jumps to 68% for those 65 and older, that’s still an alarming amount of people without the proper documentation required to handle their personal affairs as they wish. If you do not have a will upon your death, your personal affairs are handled according to state law, which can lead to a drawn-out process and — most importantly — may not be handled in the way you intended.
An executor is the person named to distribute the assets outlined in your will. They are also responsible for arranging the payment of your outstanding debts and other financial obligations, such as bills and taxes.
Typically a close family member, the executor is in charge of fulfilling the best wishes of your will. They maintain your property after your death until it is sold and — if necessary — may be asked to represent your estate in court.
Technically, executors can be compensated, but they usually perform their tasks without payment since they are carrying out your last requests out of respect. Note: The person you request to be your executor does not have to accept the job, so it’s helpful to list additional executors to prepare for such an event.
A will is critical, but not all of your assets are distributed based on your will. Some assets — such as trusts, retirement accounts, life insurance plans, and transfer on death (TOD) accounts — may have a beneficiary designation listed, which overrule your will. That means if you list one person as the beneficiary of an account in your will but have a different beneficiary designation listed on the account, the beneficiary designation receives the funds of the account.
By naming a beneficiary designation on these accounts, the funds are immediately transferred to this person rather than having to wait for them to be legally transferred through probate or by the executor. It also ensures this person will receive the full funds from the account and won’t be subject to any outstanding debts you have at the time of your death.
Review your beneficiary designations to make sure the proper people receive your funds when you pass away.
After your death, your will passes through probate, which involves a special court and is designated to execute the orders of the will. The court approves your executor; if no executor exists, it will name an administrator.
The judge supervises the distribution of assets, payment of any debts, and handling of personal affairs in accordance with the will. Again, if no will exists, personal affairs will be handled according to state law.
As noted before, a trust that is part of a will must pass through probate.
Estate planning is critical to ensure your personal affairs are handled appropriately upon your death and your loved ones are taken care of. Otherwise, your assets might not be distributed according to your wishes. It’s also important to consider any estate taxes involved with your assets, so consult a tax professional to better understand how to reduce those taxes.
Preparing your estate plan is a critical and often involved process. We have financial professionals who are trained to help you build the estate plan that best fits your needs. To learn more, please call 1-800-242-2224, visit us online, or visit your nearest Citizens Bank branch.
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