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Estate planning tips

By Dorothy G Bunce

If you have less than $5,000,000 in assets, lucky you! When you die, your property will not have to pay any federal estate tax. Since Nevada has no state death taxes, your heirs won’t have to pay taxes on anything they might receive due to your death. However, if you are, like the rest of us, not a multimillionaire, it does not mean you shouldn’t consider estate planning to protect your property and your family.

What is your estate?

Most people think of their estate as their real estate. But with today’s low real estate prices, many people no longer have any equity in the real estate they own. So if you were to die tomorrow, your estate would still include your real estate, but would also include assets not paid to a named beneficiary. It is very common for life insurance and retirement accounts to be paid to a person you have named on the account. If you haven’t named a person on your account, then this money is paid to your estate and would have to pass through probate before reaching the beneficiary you intended it to receive it. Of course, if you have investments or any other type of property, the title will either be in your name alone, in which case it does pass through probate, or it is held in joint names or with a named beneficiary, allowing it to be transferred without probate.

Avoiding probate isn’t always a good thing.

For many years, the conventional wisdom has been to do everything you can to “avoid probate.” But probate is not always the evil bogeyman that the people selling “self help kits” on avoiding probate have claimed. There are many financially sound reasons why an individual may not want to go “gung ho” on the avoiding probate bandwagon. In an attempt to avoid probate, it is possible that someone could lose everything they own and be kicked to the curb by not carefully considering the risks involved in holding title to property. Someone you love and trust today could become someone who could literally or figuratively put a knife in your back tomorrow.

Your young children.

If you die leaving young children, it may not matter how much or how little money you have. You know that your children will suffer should something happen to you. It is crucial that you develop an estate plan to provide for your children to minimize the awful impact of your death on them. Most important will be to have legal documents that state who you wish to provide them with a home and who is authorized to manage the children’s money until they are old enough to manage it on their own. It is not necessary that the person that takes care of the children be the same person that manages the money for the children. In fact, it can be a good strategy to have these two roles filled by different people. Got an “ex” that isn’t a very good parent? Without the proper legal documents, that “ex” can take control of your life insurance benefits and other money you wanted to go to your children. Although the law does provide some limits to prevent an irresponsible parent from frittering away money meant for the children, the law is not perfect. A proper estate plan can be invaluable in protecting the money you want to be used for your children.

Your irresponsible children.

Not all children that are legally adults are responsible enough to have a substantial amount of cash handed over to them. Some children are merely immature, while others have problems that make it inappropriate or even dangerous to leave them a lot of money. If your children fought over their toys as youngsters, imagine them in a fight over money as adults! Unless your adult children are perfect, you will need a carefully considered estate plan to stop the squabbling that can result from your death.

Your creditors.

If you die leaving a large amount of debt, your creditors get paid first in probate. While the homestead laws do protect a small part of your property which can be “set aside” to your spouse and minor children, these laws do not necessarily provide your family with a comfortable cushion if you die young. But a properly constructed estate plan could establish a way for your money to avoid probate so your estate can pass directly to your heirs and not into the pockets of your creditors.

How to start.

Of course, the sensible thing to do is to consult with an estate planning attorney to put together documents to provide for your children. But if that is too big a step, begin by meeting with your insurance agent or the manager of your employee benefit plan for more information. Find out what you have and who is named as your beneficiary. It would be terrible if you left a huge sum of cash to that person who broke your heart.  In fact, it could kill you if you weren’t already dead!