Estates come in all sizes, and you might think that your estate is too small for this classification, but you might be surprised. The definition of a small estate varies with each state. All states exempt some types of property from being included in an estate, which may enable you to avoid the probate issues of a more significant estate.
Small estates have advantages when being settled that larger estates do not have. Sometimes, your estate does not need to go through probate at all. Some states do not count the value of real estate, real estate you own in another state, cars, assets in a trust, or jointly owned property. The holdings in estates that are considered small get distributed faster than those that must go through probate court.
Small Estate Affidavits
Some states will let you avoid probate by signing small estate affidavits. Nolo says that these are sworn documents that enable an estate to be considered small and escape the probate process. Along with a death certificate, they allow you to claim the property in the estate.Benefits of an Estate Plan
An estate plan offers several advantages over not having one. When you die intestate—that is, without a will—the court decides what happens to your children and your assets. Most likely, there will be some decisions made that you and your beneficiaries will not approve of if you were still alive.Having an estate plan protects your assets from someone terrible at managing money. You can do this by only giving that person so much money a month or in some other restrictive way, but an executor of your will, or the trustee of your trust, needs to be someone you can trust. If desired, you can use a professional for this purpose.
You can also protect assets given to an adult child with an overbearing spouse who may want to use the money for themselves. They may be close to divorcing, and the non-related spouse may wish to take the money with them afterward. TheBalanceMoney says that an estate plan can protect the assets and ensure that only one spouse can access them.
Another reason to have an estate plan is to protect your minor children. If you die intestate, the state will appoint a guardian for them. With a will, you can nominate your choice of guardians for them until they reach 18 or 21, depending on the laws of the state they live in. Fidelity says that in addition to appointing a guardian, you may also need to appoint a conservator who will manage the assets you give to the child through your will.
Avoid Probate on Your More Valuable Assets
One way to help ensure you qualify for the benefits of having a small estate is to use strategic estate planning methods to avoid probate. Since assets in an irrevocable trust usually escape probate, putting your more valuable assets into a trust can be beneficial and save your beneficiaries some money because it can enable you to qualify as a small estate.Beneficiaries on Bank Accounts Must Match Your Will
Any bank accounts, investments, or retirement plans you have will usually require naming a beneficiary. Avoid naming your estate on these accounts as the beneficiary, or it could go through probate.The beneficiaries on those accounts also need to be the same as the named beneficiaries on your will. The name on those accounts will supersede the names on your will, so if you have one name on those accounts but your will says divide among all the children (or some equivalent), it will go to the named beneficiary.
Estate Planning for Your Business
Putting your business in your last will and testament lets you ensure it is passed to the right people when you die. If you plan on giving it to specific people, sell it to your partners, or if you want to sell it and provide the value for some or all your heirs, a will can designate what happens next. LawInc says it may need to be sold or forced closed if it is not in your will.
If more than one person owns the business, Fundera says, you may also need a buy–sell agreement. This document states who can purchase your share of the company, the cost involved, and the conditions that must be met to buy it.
Fill Out an Advanced Directive
In addition to a will, your estate plan needs to include a document that directs your medical care if you become incapacitated or unconscious. The advanced directive, also called a living will, lets your spouse, family members, and doctors know what kind of care you want in those situations. It also says what you do not want to happen, such as being intubated, mechanically supported if you cannot live without it, and more.You may also want to give someone medical power of attorney. Forbes says this document gives someone the power to make medical decisions if you cannot make them yourself. It includes medical care at the end of life.
The financial power of attorney appoints someone to manage your financial affairs when you cannot. It can be limited to all your finances or a specific one, such as the financial matters for your business.
Nolo offers a website that lets you see what qualifies as a small estate in your state. The qualifications vary in each state.
You can ensure you have the most up-to-date information when you create your estate plan by talking to an estate planning lawyer. The qualifications often change annually to adjust for inflation.
The Epoch Times copyright © 2024. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
