When a person passes away, their estate begins moving through probate court. Each state has a probate court that oversees the distribution of a person’s estate. This process ensures that the estate satisfies outstanding debts, pays finals taxes to the government and hears all disputes related to the will, insurance policies, retirement plans, and more.
The probate process involves probate judges, an estate administrator, attorneys, appraisers, creditors, and will contesters. These entities may have a legal claim to a person’s estate, even before heirs. How can a family preserve more of an estate for the heirs?
Protect the estate with these four tactics
Proper estate planning can prevent a significant amount of loss during probate. These four tactics can help families keep more of their hard-earned estate:
- Joint property: Probate administrators will consider liquidating real estate or other high-value items to satisfy creditors. People can avoid this by making their spouse or heirs joint owners of these assets, like the family home or an antique car. These assets pass to the joint owner upon death.
- Trusts: Trusts allow families to preserve assets, tax-free. Individuals have a wide selection of trusts that function slightly differently. A lawyer familiar with estate planning will recommend the best options for one’s lifestyle and family.
- Roth Individual Retirement Account (IRA): A Roth IRA differs from traditional retirement accounts in regards to taxes. When opening a Roth IRA, individuals pay taxes upfront, instead of upon withdrawal. Roth IRA plans do not have early withdrawal penalties either.
- Gifts: In 2017, gift laws changed to allow people to give more gifts, tax-free. Under the new law, a person can give another up to $14,000 in gifts, tax-free, every year. Spouses can even combine their gift allowances and give up to $28,000 per individual per year.
Draft a plan with help from an attorney
People find more success in drafting estate plans that help save the family’s wealth with the help of a local lawyer familiar with estate planning and the probate process. An attorney can prepare documents, work with the probate courts and help distribute assets.