No one likes to think about their own passingl Yet it is vitally important to create a plan for your future that includes assets such as any real estate you have and what will be done with it when you are no longer around. In fact, without a proper plan, your loved ones can experience all sorts of problems from probate issues to tax problems and even disputes. The good news is you can learn all about how to make estate planning simple in the post below. Just read on to find out more.
Do write a will
A will is a legal document that outlines which assets you will leave to specific people. A will is designed to distribute your assets to the right people after your death and provides excellent legal clarity, which can make the process a great deal smoother. A will can also be combined with other types of estate planning to ensure no asset is missed.
However, a will also requires that probate be performed. Probate is a process that confirms a will is valid. It also ensures that any creditors are notified of the named person’s passing and only outstanding debts are paid.
The problem with the probate process is that it can be incredibly drawn out and complicated, especially as Court approval is required for certain steps in the process. What this means is that it can leave any beneficiaries in an in-between state where they cannot access the assets you have willing to give them for a significant amount of time, which in some cases can be months or even years. In addition, the probate process will cost those involved many thousands of dollars in the form of attorney and court fees.
Consider a living trust
With that in mind, you may wish to consider a living trust, as either an alternative to a will or to complement one that you already have in place. The main benefit of this is that you can use a living trust to divide up assets more directly, without the need to go through lengthy and expensive probate. A living trust also provides additional privacy, as a will that goes through probate will be a matter of public record.
Of course, there are some considerations that you will need to make before you opt for a living trust. The first is whether you will choose a revocable or an irrevocable trust. The main difference between these is that the former is permanent and so cannot ever be changed, while the latter can have changes made to it.
Be sure to understand the survivorship clause in joint ownership
If you want to make state planning simple, you should also make sure you understand what survivorship is in terms of joint ownership of real estate. To grasp this, let’s first of all look at the concept of joint ownership, which means that two or more people share ownership of a property equally. In such a situation, if one of the owners passes away, then the survivorship clause will come into play. What this means is the surviving owner receives full ownership instantly on the passing of the other.
This is a popular form of state planning for married couples or close relatives who wish to ensure the other person is properly taken care of in terms of real estate when they pass. However, the survivorship clause in joint ownership is not without its risks, as the debts of one of the owners can impact the property. Additionally, it’s worth noting that the survivorship clause can also override estate planning, such as wills, which can have a significant impact on the process.
Consider a transfer-on-death deed
Another Estate planning option to consider is a transfer-on-death deed. Usually, only valid in the state of Texas, a transfer on death deed or TODD is a legally binding document that allows a real estate owner to name the person who will inherit their property when they die.
The biggest advantage of a TODD is that it means ownership can be transferred after death without needing to go through the lengthy and costly probate process. This is because a keypad legally transfers real estate to the beneficiary you name, also allowing you to maintain full ownership and control of the property while you are still alive.
What this means is you can still sell the property if you choose to, refinance it, or even change or revoke the deed if you so choose. However, even if you have done these things, if there is a TODD on the property, its ownership will be directly transferred to the named beneficiary upon the current owner’s death.
Be careful of ambiguous language in estate documents
It’s also worth noting that there are plenty of additional mistakes that can be made when estate planning. One such mistake is the use of ambiguous language in estate documents. This can be hugely problematic because unclear instructions on who gets what can trigger family conflicts after death. Unclear instructions are also more vulnerable to legal disputes, which can extend the process of inheritance, as well as make it more costly for those involved.
Be mindful of how mortgages and other debts can affect your estate planning
When it comes to leaving real estate to someone, you must release any outstanding debts on that property before it can be transferred. What this means is that while leaving property to someone, you can actually also end up leaving them debt that needs to be resolved before they can claim that property. In fact, in some cases, creditors can still have a claim on a property even after its ownership has been transferred legally.
With that in mind, if you are looking to avoid leaving a massive financial burden on your loved ones, you must settle all debts as soon as possible. However, if you cannot do this immediately, ensuring that your estate planning has clear instructions on what should be done about your debts is vital in this situation.
Final Thoughts
Getting ahead with your estate planning is always a good idea. Even if you plan to be around for a long time. However, make sure that you do your own careful due diligence and get professional advice so you understand how the options you pick will impact both you and your beneficiaries.
