Estate Planning for Dummies – The Important Steps You May Have Already Taken
Estate Planning for Dummies explains the most basic estate planning tools, many of which you may have already implemented without even knowing it.
Estate planning for dummies is a misnomer. Because the premise of this article is that you may have sufficient estate planning in place, you are clearly not dummies. But understanding how to make the most of your estate plan, will ensure that you and your family are protected in case the unforeseen occurs.
“Do I need a Will?” This is usually the first question asked by clients. The short answer is yes and, to better understand why, it is important to know the protections that a Will provides. A Last Will and Testament is the cornerstone to a comprehensive estate plan. Whether you have children or not you do have assets. Depending on their size, more complex planning may be required. But the key to knowing whether you have unwittingly begun work on your estate plan, you must know what property passes under a Will.
Probate Asset v. Non-Probate Assets
Wills cover probate assets, or assets held solely in your name. Examples include real property, bank accounts and personal belongings. Personal belongings are key because many people do not like the idea of a distant relative rooting through their most cherished items after death. Wills do not pass non-probate assets, or assets held jointly with someone else (like a bank account or real property held as a married couple or as joint tenants), assets held in trust for someone else or any asset that has a designated beneficiary, like an insurance policy, a 401(k) or an IRA retirement plan.
The goal of a good estate plan for a married couple is to maximize you non-probate asset designations. If done correctly, there will be no need for a probate process upon the death of the first spouse. Probate is the process by which the state of a decedent ensures that their Last Will and Testament was drafted and executed correctly, that the assets and debts of the decedent, the person who died, are identified, that the debts are paid and the assets are distributed according the decedent’s Will. The New York probate process governs the transfer of legal title of property from the estate of the person who has died to those named in that person’s Last Will and Testament.
If you are married and your home is listed in both spouses’ names, then the house will pass automatically to the surviving spouse with no need for probate. Likewise, if you have joint bank accounts, the assets in those accounts pass outside of probate.
Many city couples rent their apartments, making their most valuable assets their investment or retirement accounts. For these investment vehicles, you may name your spouse, or partner if you are unmarried, as a designated beneficiary. You may also name multiple designated beneficiaries as long as the percentage allocations are clear to the administrator of the investment/retirement account.
Estate planning for dummies = the maximization of non-probate asset designations. It is the best tool you have to avoid probate. And while this type of specific planning may allay the need for a Will, it is always a good idea to have a Will in place, even if you do not need to put that Will through probate. If you are unmarried, it is of particular importance that you have a Will because the protections of marriage, which include naming the surviving spouse as the default beneficiary of a decedent’s assets, will not apply to you and your partner.