Benefits of Estate Planning

Estate planning is the process of arranging for the management and distribution of your assets after your death. It involves creating a plan that specifies who will make decisions on your behalf and how your assets will be managed and distributed.

Both a will and a trust protect your assets and distribute them to your chosen beneficiaries, but there are key difference between the two types of arrangements. Learn about the advantages and disadvantages of a trust vs. a will.

Thanks to the digital estate planning tools available today, you don’t need to hire a lawyer to organize your estate plan. Using an online tool makes creating, storing, and accessing your estate planning documents simple and cost-effective. However, you may want expert advice on organizing your estate plan, especially if you have significant assets.

If you don’t have a will upon your death, it is up to the court to determine what happens to your assets. This process varies depending on the state you reside in. Your assets may go to your spouse, descendants, or other family members.

Probate is the legal process through which your estate is settled and distributed under the supervision of the court. Probate can be a time-consuming and costly process.

If you have a will, the probate court validates it and oversees the distribution of your assets according to the will’s instructions. If you have a trust, your assets typically avoid probate. By transferring assets to a trust during your lifetime, those assets can pass directly to your beneficiaries upon your death.

Estate tax is a tax a beneficiary receives on assets they inherit. Luckily, most people don’t need to worry about paying estate taxes. In 2023, the federal estate tax exemption was over $12 million. As long as the amount inherited is below that number, it is not subject to federal estate taxes.

However, it’s important to know that state taxes may apply. For example, the Minnesota exemption amount is $3 million. Wisconsin and Iowa do not levy an estate tax.

The amount of time an executor has to pay beneficiaries varies depending on the complexity of the estate, state requirements, and any challenges that may arise during the probate process. In general, executors are expected to distribute assets to beneficiaries in a timely manner, and the process is more likely to go smoothly and quickly when a solid estate plan is in place.