Humans are often uncomfortable with uncertainty, and it’s part of what makes us, well, human. Estate planning is a process of planning for uncertainty since many things happen in life that you cannot predict. One of the tougher issues in estate planning is deciding how to allocate your assets. In doing this, you have to answer the question of who in your life gets specific items of monetary or sentimental value.
Determining the right assets to leave behind to different beneficiaries is a critical part of estate planning. When doing this, many people find they have certain instincts or can easily identify their first choice. But after a period of reflection, doubt can sometimes creep in and make you second guess your asset allocation plan. You may begin to wonder:Will they value the asset as you have? Will they pass it on to another beneficiary in the same manner as you? Are there any legal concerns with passing this asset onto the named beneficiary? There are many reasons to second-guess your process when divvying up your estate, but here are a few pointers for making sure you identify the best beneficiaries. Going through this process can ensure that you are confident in your final estate plan.
1. Talk to your beneficiary candidates.
One of the best ways to remove doubt in your beneficiaries is by speaking to them directly. A frank conversation can often give you an idea of how they might treat the asset after you have passed. For instance, if you have a piece of real estate or an heirloom that you want to stay in the family, it’s worth asking a potential beneficiary directly what they would do if they were to inherit it. While there is always a chance that they may not tell you the truth, you can often get a better idea of their intentions after discussing the topic directly.
2. Consider legal concerns.
When you have minor children, you usually leave assets that ensure they are cared for until adulthood. The most common way to do this is by securing adequate life insurance. However, suppose you name a minor child as the beneficiary of the policy. In that case, you must also designate a guardian or establish a trust to protect those funds so that they are used as you intended. Without a guardian designation, the court may designate someone you would not have chosen to manage the assets on the child’s behalf. Conversely, if you name a minor child as a direct beneficiary on certain accounts, the assets will be paid in full to the child as soon as they reach 18 or 21 (depending upon the state). Unfortunately, providing a young adult with this much money at such a young age may not be in their interest.
In addition to legal concerns related to naming minor children as beneficiaries, you may also want to understand any legal implications if you have a special needs beneficiary. Leaving these assets directly to the individual could unintentionally disqualify them from receiving governmental aid or assistance. No matter what legal issues may arise with your intended beneficiaries, it is best to get legal advice from an estate planning attorney so that you understand the full legal picture when divvying up your assets across certain beneficiaries. This advice is one way to remove uncertainty and be confident that you are naming the best possible candidates to receive your assets.
3. Account for tax implications.
While it is never easy to divvy up your assets in an estate plan, most people believe that their wishes will be carried out once it is done. But you must also consider the tax implications for those who receive your assets. For instance, if the value of your estate is over the estate and gift tax threshold and your estate plan fails to account for the taxes that will need to be paid, then the taxes will seriously cut into the amount your beneficiaries receive. A skilled estate planning attorney can help you get a comprehensive understanding of how different strategies may benefit certain beneficiaries more than others.
Estate planning is not an easy process. And it is hard to be confident that you are leaving behind the right assets to the right loved ones. But working with a knowledgeable estate planning attorney can help to remove doubt from this process. Expert guidance can help you feel more comfortable and confident in your entire estate plan.
The Law Office of Janet L. Brewer is experienced with complex individual estate planning and business inheritance planning. We can help you identify your estate planning needs and prepare legal documents to help effectuate a smooth transition through California probate.
