Having your estate handled after you pass away is important because it helps minimize the potential for legal and financial problems for your loved ones. However, it’s not a topic most people like to think about until they have to. That’s why it’s essential to know how your estate will be handled after you pass away and how you can help mitigate risk from taxes, probate, and other issues that can arise when someone dies with little warning. Here are some things you should know about handling the estate of someone who has recently passed away.
What Is Probate?
Probate is the legal process in which your will or estate plan is reviewed and approved by a judge before your assets are distributed to your heirs. There are multiple reasons why you may want to avoid probate. One of the biggest reasons is to avoid taxes. If your estate is probated, it is subject to estate tax. However, if you have an estate plan in place, your assets can be distributed outside of probate, which means you can avoid estate taxes. Another critical reason to avoid probate is that it can be a lengthy and costly process that can delay your loved ones from accessing their inheritances. Although probate can vary depending on the state where you live, it can take anywhere from three to 12 months. During that time, your assets are frozen and can’t be accessed by your loved ones.
Taxes When You Pass Away
As previously mentioned, if your estate goes through probate, it is subject to estate tax. However, if your probate lawyer has correctly set up your will or estate plan, the assets can be distributed outside of probate, which means they are not subject to estate tax. If the total value of your estate is below the federal estate tax threshold, your heirs won’t have to worry about paying any taxes. The federal estate tax threshold changes every year. In 2019, the threshold was $11 million. If your estate is valued at more than $11 million, your heirs must pay the estate tax. The amount of the tax will depend on the total value of the estate. However, the good news is that the executor of your will can use estate tax planning strategies to minimize or even eliminate the tax bill for your loved ones. If you have a proper estate plan, your heirs can avoid paying any unnecessary estate taxes.
Your Will and Estate Plan
If you have a will and an estate plan, your loved ones will have a clear path to access their inheritances without any legal complications. The will spell out who gets what and when. Having an estate plan in place can also help you sell estate jewelry for a higher price. If you don’t have an estate plan and pass away, your assets will be distributed based on state law. Since your family members can’t be sure exactly what will happen, they might be less interested in buying your jewelry. Having an estate plan can help ensure that your heirs get access to their inheritances as soon as possible and that they are able to resell your estate jewelry at its highest value.
Other Important Documents
Besides your will and estate plan, there are a few other important documents you should have in place as part of your estate plan. A durable power of attorney for finances and a health care power of attorney are two of the most important documents you can have. A durable power of attorney for finances gives someone you trust the authority to make financial decisions and pay bills on your behalf if you become incapacitated. A health care power of attorney gives someone you trust the authority to make medical decisions on your behalf if you are unable to make those decisions yourself. Having these documents in place can help ensure that your wishes will be followed if you ever become incapacitated.
Your estate will be handled after you pass away based on the instructions in your will or other estate planning documents. If you don’t have an estate plan, a probate court will assign an administrator to manage your assets. Although probate is designed to protect your loved ones from fraudulent claims against your assets, it can also result in taxes being levied against your estate. If you have a will and other estate planning documents in place, your estate can be distributed outside of probate, which can help eliminate the potential for taxes being levied against your estate.