“Fifty-five percent of all American adults do not have a will,” according to a 2007, Harris Hubbell research study. “Only one in three African-American adults (32 percent) and one in four Hispanic American adults (26 percent) have wills, compared to more than half (52 percent) of White American adults.”
“Every adult should have an estate plan, regardless of age, family circumstances or net worth,” advises Attorney William Smith of Cleveland, Ohio. “In too many cases, I have seen family conflicts, unnecessary expenses and delays as a result of little or no estate planning. It’s really unfortunate that people can spend a lifetime building and accumulating wealth, only to have it wither away at their death. Their heirs are the real losers. It really doesn’t have to be that way.”
The state of your estate
An individual’s estate includes all of the assets they personally own or have an ownership interest. This includes investments, real estate, personal assets, collectables, business interests and life insurance proceeds. Effective estate planning can reduce conflicts, save time, lower expenses, save on taxes and maximize the amount transferred to heirs. Estate planning is not rocket science; however it does involve legal transactions and the utilization of a qualified attorney. What is the state of your estate plan?
Why is a will necessary?
A Will is the cornerstone of an estate plan. A Will directs the distribution of assets within the estate to the heirs of choice. An executor is appointed to make sure that the Will is processed correctly and that its terms are carried out. If a person dies without a Will, they are considered to have died “intestate.” State laws of descent and distribution will determine how their estate will be distributed to the surviving relatives. If there are no living relatives, the property will go to the state. Also, if there are minor children, the state will appoint a guardian. A properly executed Will helps to maintain control of these personal decisions and can provide the flexibility necessary in an estate plan. Simple Wills for married individuals typically cost from $500-$1000.
What is probate?
Probate means, “to prove the Will.” It is a legal proceeding, which brings the Will before the court to prove its validity as an individual’s “last Will and Testament.” Upon completion of the Probate process, ownership of all property that was titled in the deceased’s name is distributed to heirs identified in the Will. Probate can be an expensive, time-consuming and public process. It is not unusual for probate to consume 5-8 percent of the gross estate and to take one to two years to complete.
Proper planning can minimize the impact of probate. Some of the common methods for minimizing Probate are:
•Joint Tenancy—Avoids probate by “Operation of law.” Property titled as joint tenants with right of survivorship automatically transfers to the survivor, at the death of one of the joint tenants.
•Contracts—Life insurance, annuities and qualified pension plans avoid probate, because they are legal contracts
•Lifetime Gifts—Assets “gifted” and title transferred during the owner’s life are removed from the estate.
•Revocable Living Trusts—Property is transferred to a revocable living trust during the owner’s life.
Preserving and effectively transferring wealth is a planned process. Now is good time to review your family’s estate plan with a competent estate-planning attorney. If your estate plan is not where you want it to be, you must take control and make it happen!
(Michael G. Shinn, CFP, registered representative of and securities and investment advisory services offered through Financial Network Investment Corp., member SIPC. Visit www.shinnfinancial.com for more information or to send your comments or questions to firstname.lastname@example.org. Neither Michael Shinn nor Financial Network provides legal advice. Please consult a legal professional before implementing any strategy.)