This is the predominant form of asset ownership among spouses. Joint tenancy (or TBE) sidesteps probate upon the first spouse’s death. However, a surviving spouse shouldn’t include other relatives as joint tenants. This can risk their assets due to the debts, bankruptcies, divorces, or lawsuits of any additional joint tenants. Joint tenancy might also lead to unnecessary death taxes on a married couple’s estate.
A will is a document detailing the distribution of assets after death. It doesn’t avert probate and gains legal authority only post-death, once the original will reaches the Probate Court. Anyone with minor children should have a will to appoint guardians for orphaned children. Testamentary trust provisions in wills can manage and distribute assets to heirs, and assets can be orchestrated to bypass death taxes.
Also known as an Advance Medical Directive, a living will outlines your preferences regarding medical life support if you’re terminally ill and can’t express your wishes. Typically, a living will accompanies a Durable Power of Attorney for Health Care, granting someone the authority to make health decisions on your behalf if you’re incapacitated.
Dying without a will is termed intestacy. In such cases, your state’s legislature dictates the inheritance of your assets. You may not concur with their scheme, but about 70% of Americans currently default to it.
Beneficiary designations enable the probate-free transfer of certain assets upon death. Non-probate transfer laws differ by state, with life insurance death benefits and bank accounts being common examples.
This allows you to designate someone to make personal financial decisions on your behalf when you’re incapacitated. Without these documents, you and your family would face a probate procedure termed guardianship and conservatorship, wherein a judge determines your decision-maker.
This entails an agreement between the Trust-makers, Trustees (or Trust Managers), and Trust Beneficiaries. For instance, a couple might name themselves in all three roles, control the assets within the trust, and benefit from them. “Back-up” managers can intervene if the couple becomes incapacitated or passes away. Provisions in the trust dictate asset management and distribution to heirs post the trustmaker’s death. Properly planned, such trusts can also minimize or negate death taxes outside court proceedings.
Regardless of age, wealth, marital status, or asset title (like a house), if you wish for your beneficiaries to avoid court interference at death or incapacity, consider a revocable living trust. This trust amalgamates your assets under a unified plan. Yet, they don’t shield assets from personal creditors.
Asset Protection Trusts safeguard your assets from your or your beneficiaries’ creditors. These trusts aim to shield assets from nursing homes, lawsuits, children’s divorces, or other creditors during one’s lifetime and posthumously. They aren’t tax trusts but are tailored for those unconcerned about federal estate taxes upon death (currently $12.92 million for individuals and $25.84 million for couples). The primary perk is you remain in control of the trust while protecting your assets during your lifetime and beyond.
