Estate planning and probate are both processes which determine how your estate will be distributed among your inheritors upon your passing. Estate planning refers to the preparations and instructions you make for how you would like your assets to be handled. Probate is the process by which your wishes are carried out and your estate is distributed after your death. On the surface this may seem simple but in practice these processes are usually more complex.
What Is Estate Planning?
Estate planning may sound like an activity reserved for the financially well-off or those entering into retirement, but creating an estate plan can be beneficial to anyone. Everyone has an “estate” composed of everything they own and control. This can include everything from cars, real estate, and bank accounts to books and electronics. Estate planning refers to the creation of instructions for distributing your assets amongst your beneficiaries after you pass.
Estate planning is an ongoing process and will require revisions as new personal or legal factors present themselves. Some events which can affect the contents of an estate plan include marriage, divorce, income changes, or death in the family. It is never too early to start thinking about the future and having a detailed and well-drafted plan can prevent delays and fees when your assets are distributed.
Processes associated with estate planning can include:
- Creation of a will: A will is a document outlining the process and terms for how your assets will be handled after your death.
- Creation of a living trust: A trust appoints a trustee to manage an asset (or assets) on your behalf. Unlike a will, this agreement is active during your lifetime and assets named in a trust are transferred to the inheritor upon the time of your death.
- Power of attorney: If you become incapacitated and can no longer manage your medical or financial matters, you can appoint a person to legally handle your affairs.
- Appointing an executor: An executor is the person you choose to manage your affairs and estate during the process of probate after you pass.
- Reduction of taxes upon the transfer of your estate: The goal of estate planning is to transfer your belongings as you see fit. The process for best reducing taxes might not always match up with the way in which you would like your assets to be distributed. A good attorney can help you find the right balance.
Probate is the process of dividing, managing, and distributing your estate after you pass. This is a court-supervised process that aims to ensure your belongings are divided exactly as you set forth in your will. A legal representative will assist the executor named in your will to carry out your last wishes.
There are several disadvantages to probate which cause many people to avoid the process entirely. One of the most common issues is that it can be tremendously time consuming, potentially lasting years. During this time inheritors generally do not have access to the assets which have been left to them. Another complaint is that a long period of probate can be very costly. In many cases, fees are paid with funds drawn from the estate.
With proper planning you can minimize or even eliminate the probate process. There are several tools which sidestep probate including life insurance, living trusts, and joint ownership agreements. A knowledgeable attorney can help to determine what course of action is best for you.
If you fail to create an estate plan, and in the absence of a will, the government will distribute your belongings according to probate laws. Without a valid executor, a court appointed representative will be in charge of how your estate is divided. Many times this will go directly against what you may have wanted. The court may also choose an executor, such as a spouse, if that person would have reasonably been chosen by the deceased.
Dedicated Estate Planning Attorneys
Creating a detailed estate plan and preparing for probate can allow your inheritors timely access to your assets and save them from the headache of an extended period of probate. Our Nassau County estate planning attorneys at the Davidov Law Group can help you plan for the future and ensure your legacy carries on exactly as you intend.