Approximately half of Americans fail to make an estate plan, which can be a major mistake. Real estate investors have even more to lose without thoughtful estate planning. So what are some of the tools that we use for an effective estate plan? What can you do today to make life easier for your heirs once you are gone?
Read on to learn about three tips that you can use now.
This first tip pertains mostly to individuals who have already established an estate plan, or are using legal structures to protect real estate. You want to make sure all of your documents--deeds, trusts, and life insurance--match up with your estate plan. If you designated one person as the beneficiary of a land trust, for instance, naming another person in your estate planning documents will not "cancel" the original beneficiary designation. Taking the time to line up all of your legal documents with your wishes now will help ensure that they are carried out. Similarly, you want to keep your estate plan updated. Any time you buy or sell a major asset, you should update your estate plan.
Probate Court can be a miserable, emotionally experience for everyone involved. The good news is that you can spare your family from ever having to handle probate with a single document: a revocable living trust. Some people believe a will alone is sufficient, but this is a myth. A will must go through probate court. To make things easier on your grieving family, set up a living trust. You may specify in this document which assets go to whom. Some investors use this in conjunction with a "pour-over will" to easily transfer ownership of a business.
Trusts are a critical part of estate planning, particularly if you have children or other under-age benefeciaries. A trust allows you to designate funds for a particular individual. As an added bonus, when assets are transferred to heirs over the age of 18, the heir receives the benefits of asset protection and creditor protection. Such benefits are not available to heirs receiving assets in a Probate Court context.
If the discussions about the finer points of Probate Court and the different types of trusts make your head spin, that's okay. That's where attorneys come in. When planning your estate, you will always want the guidance of an experienced lawyer familiar with these issues and more. If you have many assets or a high net worth, getting professional help is even more important.
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
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