Creating an estate plan is an important part of protecting the future of your family. It allows you a say in how your assets are to be distributed following your death. A state distribution of your assets, which occurs if you haven’t created an estate plan, doesn’t offer the same tax advantages that you can achieve by developing a smart estate plan. Even those that have created an estate plan often neglect key aspects that could allow them to take advantage of certain estate planning rules which could allow them to limit the amount of tax on their estate leaving their loved ones with the amount desired and less of a burden. With that in mind, here are some key aspects that people often mismanage and why you should hire a professional to handle your estate plan.

Have an Estate Plan

It may seem a bit oversimplified, but having an estate plan is an important aspect of protecting your family that many people neglect. If you don’t have an estate plan, your assets will be distributed by the state which means that you won’t have a say in how your estate is dispersed. A lack of instructions on how you wish your estate to be distributed will place your estate in the hands of the inheritance laws. While these laws typically differ from state to state, usually it results in various family members getting percentages of your estate. This may work out as you wish, but it’s more likely that your assets will be distributed in a way that differs from your preference.

Lacking an estate plan also puts an additional burden on your family in a time of grief. Establishing a will shortens the probate process ensuring that your family receives their inheritance as soon as possible and avoids any potential disputes. If you don’t leave a will, the distribution of your assets could result in a long and tumultuous dispute among family members, but if you leave a will that states your wishes, the process will be simplified.

Beneficiary Designations

The most basic and often overlooked aspect of an estate plan are beneficiary designations. Even when it comes to retirement funds, such as IRAs and 401(k)s, your beneficiary controls your estate following your death and distributes your assets. Part of a will includes naming your beneficiary. While your will may be valid and will display your wishes, you’ll want to name a beneficiary that you can trust. However, some people who don’t seek professional assistance in creating their estate plan may ignore this important step.

Annual Gifts

A great way to reduce the amount of taxes that are levied on your estate is by issuing annual gifts. There is a long list of exemptions and deductions that could be taken advantage of by these gifts which include the lifetime exemption, marital deduction, gift and estate tax charitable deductions, annual exclusion gift, and direct transfers for the purpose of education (tuition) and medical care. Depending on your financial situation, it’s wise to make an annual exclusion gift to those that are close to you. Over time, these gifts will result in a large sum of money being transferred out of your estate which will have the effect of reducing the overall taxes on your estate. There are several ways that you can use annual exclusion gifts to transfer money out of your estate which a professional will assist you in finding.

Impact of Life Insurance

Transferring the ownership of your life insurance policy to a trusted family member may be a positive step in establishing your estate plan. But it’s not quite as easy as it sounds. There are two types of life insurance ownerships that you will have to choose from; trust ownership and direct ownership. The correct decision on which type of ownership is best for your estate depends on many factors which include family dynamics, net worth, financial positioning, and personal preference. This decision is a complex and individualized one which a professional estate planner can help with.

There are many advantages to establishing a plan for your estate which includes having a say in how your assets are distributed and protecting your family from complex and expensive legal matters following your death. Those who attempt to create an estate plan on their own often end up making mistakes that result from a lack of understanding of the different important aspects of their plan. If you’re looking to create a solid estate plan to protect your family, come see the professionals at France Law Firm.