Baby Boomer Beginners Guide: Inheritance Planning Made Simple
Your kids will probably hush you if you start discussing this with them.
After all, they don’t want to think about losing you.
But you don’t want them to lose their inheritance. Or worse, for the government to take it from them.
In this article, you will learn about the following basic steps you need to take if you want to plan your inheritance properly:
- Understanding your assets
- Tax considerations
- What happens if you don’t make an inheritance plan
Let’s go!
Understanding Your Assets
Broadly speaking, when writing your will, your assets are either probate assets or non-probate assets.
Probate Assets
Your will controls the distribution of probate assets. These are made up of anything you retain sole ownership of.
Non-Probate Assets
These assets are outside of your control as they are generally made up of assets with joint ownership, such as a joint bank account, mortgage or property such as a car. Insurance accounts, retirement accounts and anything else held in a trust are also non-probate.
What you need to understand is that a court will distribute your probate assets, while non-probate assets will go directly to your beneficiaries. The probate process is a lengthy one and involves hiring an agent to act on your behalf – an executor – who will need to organize your assets, file taxes, pay bills and more. This isn’t just time consuming, it’s costly.
Avoid the time and cost by keeping as many non-probate assets as possible and create a retirement trust.
Tax Considerations
Estate Tax is a tax imposed on your property when it is transferred after your death. An estate tax return needs to be filed.
You may leave your spouse an unlimited amount of assets without incurring tax. This solution isn’t ideal, as the decedent (you) has no power to manage how the assets are used or distributed.
A way around this is to split your assets into two trusts which can be self directed and tax free – meaning your heirs receive 100% of your estate.
Oops. I Forgot!
Seriously, why have you not put some thought into this until now? Nothing in life is certain – least alone life itself. I’m not going to get all touchy-feely about how precious it is, but if you’ve been putting off taking action on this because you feel you have nothing to bequeath, don’t need to do it yet, or are immortal; then this is the time to drop everything and get it done.
I’ve included helpful links at the end of this article to make it even easier for you. But first:
What happens if you don’t make a retirement plan.
It’s called dying “intestate.” The state law where you live decides how your inheritance is distributed. However, here are a few things that will happen regardless of state:
- If you are survived by family, your property is divided between them – what ratio is determined by state law
- If you are not survived by family, it becomes property of the state
So you definitely want to take control today.
What You Just Learned
Now you know the difference between probate and non-probate assets, how to avoid estate tax and what happens when you die intestate. But you’re not done yet – move now to:
Your Next Steps:
Download this estate planning tutorial from Oregon Legal Center – slide 11 has the process map you need
Grab a free plan template from RocketLawyer.com here.
If you wish to discuss this with your family, you may wish to use Grandma’s Yellow Pie Plate Workbook and resources
Prepare your loved ones properly so that they can make the most of their inheritance with this report from ConsumerReports.org
Talk to an adviser at your bank about creating a pension trust.
Good stuff!