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Discover why having an estate strategy is crucial for managing probate and protecting your assets. Learn about wills, trusts, and power of attorney.
The Big One: Probate
Probate is the legal process that wraps up a person's legal and financial affairs after their death.
Probate can be costly and easily take months or years, depending on the state. While no estate strategy can completely eliminate the risk of an extensive probate, managing the probate process may be possible with a valid will and assets that avoid probate.1
Some assets that avoid probate include:
Property held in a trust
Property given away before you die
Jointly held property that isn't common property
Assets in a pay-on-death account
Death benefits from insurance policies
Retirement accounts with a named beneficiary
Living Wills
These aren't to do with what happens after you die, but what to do before you die.
Wills outline instructions on how to handle difficult descisions regarding your estate. Despite the importance of this document, only 32% of Americans have one. The #1 cited reason for not having a will is procrastination.2
Tax Exemption Strategies
In 2024, the estate and gift tax exemption is $13.61 million.3
Potentially hundreds of thousands of additional American households can take advantage of these strategies, passing on some or all their assets free of estate taxes.
Less than 1 out of every 1,000 estates will exceed the exemption.4
Living Trusts
Created and funded while you are alive, Living Trusts are composed of assets you choose to put into them.
Managed by a trustee (usually you), the assets are structured to pass to a beneficiary, or beneficiaries, automatically upon your death, much like a will.5
Power of Attorney
A written authorization empowering a person to execute personal and legal matters on your behalf.
A good strategy may be to pick a person who either has some experience in these fields or has the necessary qualities to handle these decisions. This is often a spouse or an adult child.
Durable Power of Attorney allows that person to act on your behalf, even if you're incapacitated or otherwise unable to make decisions.
Sources:
Investopedia.com, December 18, 2023
Caring.com, 2024
IRS.gov, 2024. The current estate tax exemption liminit is scheduled to expire December 31, 2025.
ITEP.org, December 7th, 2023
Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider using a professional who is familiar with the rules and regulations.