Distribution of Your Estate

Let's consider six unique ways that you can control the distribution of your estate.

Intestacy
Intestacy is the equivalent of dying before you have made the choice to establish a will. As a result of your inaction, state law dictates how your assets are distributed. Probate court enforces these state laws as well as ensures that your debts are paid. In addition, your estate and beneficiaries will be subject to the probate process, which means time delays, substantial fees, and a lack of privacy.

Wills
An alternative to intestacy is the establishment of a will, which conveys your written intentions regarding the distribution of your estate; however, the probate process still applies in the presence of a will.

A will has three primary functions. First, this written document allows you to have a close family member or friend or a financial entity, also known as an "executor", act on your behalf. This ensures that your intentions are met.

Second, you are able to designate a guardian(s) to fulfill the parental role(s) for your children. This step avoids leaving the decision in the hands of the probate judge.

Finally, a will can spell out the terms of a testamentary trust, which essentially originates during the probate process and is governed by a trustee who properly distributes your assets among your beneficiaries.

Trusts
Created when you are alive or following your death, a trust is a legal document guaranteeing that your executor will never face a probate court and that specifics regarding your estate can be managed on an individual basis. If you already have a will, you are not obligated to establish a trust because of a will's generalized nature; however, please understand that your will is subject to a hearing/hearings in probate court. Conversely, it is recommended that a trust be accompanied by a will.

Although trusts endure initial costs and fees for maintenance purposes that almost nullify future probate savings, they do allow you to employ the expert advice and assistance of professional asset managers, ensure the protection of your assets upon your incapacitation, and lessen the burden of pesky estate taxes.

By setting up a revocable trust, you can still control the purchase and distribution of your assets as long as you convert ownership back to the trust prior to your death. The complex, financial implications of these and other types of trusts can be more succinctly described by consulting the proper professionals.

Joint Ownership
Joint ownership eliminates the probate process. Why? Because joint tenancy with rights of survivorship means that the living person legally becomes the sole owner of the property.

Joint tenancy can exist between people other than spouses, while qualified joint tenancy is reserved for spouses and implies specific income and estate tax advantages. Because income and estate taxes are affected differently under these two classifications, it is wise to seek professional assistance to determine which designation is best for you.

Contracts
Throughout your career, you are probably familiar with the question on retirement plans and other related documents that asks you to name your beneficiaries. This legal contract enables your assets to transfer ownership without requiring a probate hearing. Naming your beneficiaries is crucial and should be done immediately to ensure that the distribution of your assets falls into the right hands.

Remember...
The implications of your decisions can create a number of outcomes. Probate, estate taxes, fees, and other impositions are either present or void depending upon the distribution of your estate. Consulting a professional allows you to make the educated decisions necessary to appease your personal wishes.

This information is presented to educate the reader and does not constitute professional tax and legal advice.

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