Written by our preferred partner: Ryan Knight, Attorney at Law.
Estate planning is the most important thing you can do to make sure everything you own is handled exactly how you want after you pass. But what is an estate exactly, and what does your estate encompass? Let’s break down the details.
What Is an Estate?
Your estate is everything you own, including your money, house, retirement accounts, assets, properties, insurance policies, and more.
Estate planning helps you control what happens to your estate in the most efficient way possible. If you don’t make a plan for your estate, the state will make those decisions for you when you die. At that point, your possessions get caught up in a lengthy process called probate. (We’ll discuss more on the probate process below.)
Do I Need a Will or a Trust For My Estate?
Yes, you need a will if you’re married, have children, or have any assets to leave behind when you pass.
Certain trusts—like a gun trust—are actually mandatory to pass a belonging from one generation to the next. You may also consider a trust if you want to simplify your estate administration and bypass any and all probates that would be required.
What Is Probate?
The probate process is when the court determines three things:
- Is your will valid?
- Are your debts paid?
- How should your assets be distributed?
This process can last anywhere from six months to two years (or more). To make this easiest on your family and keep probate on the shorter side, it’s critical to work with an experienced estate lawyer and get all your plans in order.
If you’re in Tennessee and want to learn more about the probate process or estate planning in general, come to one of my free lunch and learn events hosted by Beacon Capital Management. View the calendar here.
Taxable Estate vs. Probate Estate
Your taxable estate refers to literally everything you own—but don’t worry, most estates aren’t subject to the dreaded “estate tax.” In fact, only estates valued at $12.06 million or more are subject to federal estate taxes.1
Your probate estate only includes the things that must go through probate—and conveniently, there are some things that don’t go through probate.
An example of something that does not have to go through probate would be an investment account with a named beneficiary. Because a beneficiary has already been named, that investment doesn’t go through probate. The beneficiary automatically gets that benefit by default.
Another example of taxable estate versus probate estate would be anything you have placed in a trust. Some common trust planning options you may have heard of are revocable living trusts and gun trusts. For example, when a gun trust is set up, the beneficiary has already been determined and they can take possession of the asset as soon as the gun owner dies. (Or even, in some cases, while the gun owner is still living.)
What Is an Estate Lawyer?
An estate planning attorney—also commonly called an estate lawyer or probate attorney—is a licensed professional with a deep understanding of local and federal laws surrounding your estate. An estate planning attorney can help with:
- Setting up your will, trust(s), powers of attorney, and more
- Reducing or eliminating estate taxes
- Finding ways to avoid a lengthy probate process
- Creating an overall estate plan that reflects your exact wishes and values
If you’re in Tennessee, I’m ready to help you create a customized estate plan. I’d love to offer you a free, no-obligation consultation to go over your current plans and uncover any gaps.
What Is An Estate Account?
If you have a will and not a trust, an estate account will be created to hold any funds from the estate that come in during the probate process.
For example, if a family home is willed to three siblings when their father passes, they may choose to sell the home and split the proceeds. Any proceeds from the sale of the house will be held in the estate account until it can be properly distributed to the beneficiaries named in the will—in this case, the three siblings—through the probate process.
Do I Need a Power of Attorney?
A will only takes effect upon your death, so it’s helpful to have a power of attorney in place in case you become incapacitated. Your power of attorney gives someone you trust the legal right to make medical, financial, and other important decisions on your behalf.
While we’re on the subject of end-of-life planning, HIPPA authorizations are also important. If you become incapacitated, there’s probably a list of close relatives you’d want to be able to get the details about your health. Make sure their names are on your HIPPA authorizations, filed with your medical professionals.
Your Estate Planning Checklist (in 5 Easy Steps)
Now that you have a better understanding of what your estate actually is, take these next steps to maintain control:
1. Write down your goals.
What do you want to accomplish in your estate plan? The easiest way to get started is to simply write down your wishes, clearly and intentionally. You can use this as a guide when you meet with an estate lawyer.
2. Inventory your assets.
Make a list of everything of value that you own. Track down which things already have named beneficiaries; versus which ones you’ll need to plan for in your will or trust.
3. Select a professional to help.
You’ll want to find a local attorney who specializes in estate planning. And by the way, there’s a difference in estate planning and basic will preparation. You can create a basic will online, but as we’ve discussed, there are many other aspects to your overall estate that need to be accounted for.
4. Have legal documents prepared.
Of course, this step is crucial: Get your will, trust, and power of attorney documents drawn up as soon as possible.
5. Don’t forget to fund your trusts.
Make sure you fund your trusts properly, which means getting all of your assets that need to be in your trust into your trust. If you never put your assets in the name of the trust, all the planning you did to simplify the administration process will be useless. Once you’re gone, a probate would again be required for those assets.
I hope this gives you more confidence in planning for your estate. If you’re ready to dig into some exciting estate planning strategies, you can download Beacon Capital Management’s free Guide to Estate Strategies here:
Get the Free Estate Strategies Guide!
From Beacon Capital Management:
Ryan Knight, Attorney at Law owns Knight Legal and is our preferred partner. His office is jointly located with our headquarters in Franklin, Tennessee.
If you’re ready to talk about your legacy, your estate planning options, or your overall financial plan—give our firm a call. Beacon Capital Management is a full-service wealth management firm that takes a comprehensive approach to financial planning. We want to help you cover the most important areas of your life.
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1 Internal Revenue Service. IRS.gov. Nov. 15, 2021. “Estate Tax.” https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax. Accessed Apr. 18, 2022.