You’ve no doubt worked hard during your career to save money and accumulate assets. Your estate may include investments, cash, retirement accounts, real estate and even personal property. While you may need to use some of those assets to fund your retirement, you likely also want to leave as much of your estate as possible to your loved ones.
Unfortunately, it’s possible that not all of your assets will be passed on to your heirs. In fact, a large portion of your estate could be used to pay for things like court fees, lawyer expenses, taxes and much more. Your family may end up with only a fraction of your estate.
The good news is there are steps you can take to minimize these costs and maximize the amount of assets that are passed on to your family. Below are a few steps to consider as part of your legacy plan to minimize legal and administrative expenses:
Use the right documents.
A will is the most basic estate planning document, but it’s also one of the most important. A will provides instructions on which loved ones should receive which specific assets. Without a will, the court will decide who receives your assets. That could involve numerous court proceedings, a prolonged legal process and a substantial amount of fees. You can avoid much of that cost by creating a will.
Even if you have a will, some of your estate may have to go through the probate process. During probate, your executor will file final tax returns, pay off debts, notify heirs and more. There are costs associated with many of the common tasks in probate.
You can use a trust to minimize the amount of assets that pass through probate. Any assets held in a trust pass directly to the trust beneficiaries without going through probate or any other court functions. That can help you protect your assets and avoid unnecessary expenses.
Check your beneficiary designations.
You likely own assets that have a beneficiary designation. These usually include things like life insurance, qualified retirement accounts, annuities and more. With these assets, the funds are paid directly to your named beneficiaries instead of going through probate.
If you don’t have beneficiaries on these accounts, however, or if your beneficiaries are deceased, the assets are paid into your estate. That means they go through probate just like assets that are governed by your will. Check to make sure you have the correct beneficiary designations so you can keep assets out of probate.
Use a Roth IRA.
Do you hold assets in a traditional IRA or a 401(k)? These accounts are popular because they allow you to grow assets for retirement in a tax-deferred manner. However, that means all distributions, including death benefit payouts, are taxed as income. Your beneficiaries could face a sizable tax bill on their share of your qualified retirement accounts.
You can eliminate that tax bill with a Roth IRA. A Roth IRA still has tax-deferred growth, but it also offers tax-free distributions, assuming you are disabled, dead or over age 59½. Upon your death, your beneficiaries receive their share of the account tax-free.
Ready to develop your estate plan? Let’s talk about it. Contact us today at Safe Retirement Strategies. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
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