When you think about estate planning, you may start to wonder about what an estate really is. What is included in this estate you are planning for? It is a good question and a great way to begin reflecting on your estate and how you want it to be handled after you pass away. Let’s take a look at the different meanings of the word “estate” and the implications the relevant definitions can have on your estate planning process.
What Makes Up My Estate?
One construction of the definition of estate is everything that a person owns. Technically, all of your assets comprise your estate. There is also another, more limited definition of estate when you consider your estate for estate planning purposes.
When someone refers to the “probate estate,” they are not necessarily referring to everything a person owns. When referencing the probate estate, a person is referring to those assets that will be distributed pursuant to a legally valid will. In the absence of a will, the probate estate refers to those assets that will pass via intestate succession as established by the laws of the state.
The probate estate will, as the name suggests, have to pass via the probate process. Probate is the court supervised process of settling the probate estate of a deceased individual. A notoriously lengthy and complex process, probate involves things such as paying off outstanding creditor obligations of the deceased individual, taking inventory of the probate estate, and, at the end of the process, the probate estate is distributed to the beneficiaries according to the terms of the will or the laws of intestate succession.
Many Remove Assets For Multiple Reasons
Because of the time cost, financial cost, and lack of privacy afforded by the public process of probate, many look to remove assets from their probate estate. Non-probate estate assets can include a wide variety of asset types and there are various ways to remove assets from your probate estate.
For instance, life insurance policies and retirement accounts with named beneficiaries will pass outside of the probate estate. Financial accounts such as securities accounts and bank accounts can fall outside of the probate estate when they are designated as payable on death accounts with a named beneficiary.
A Trust: The Benefits
Using a trust is a common way to remove assets from the probate estate as well. A trust can hold a wide range of asset types. To set up a trust, a trustee must be appointed to manage the trust for the benefit of the trust beneficiaries and according to the terms set forth in the trust document. Assets are then transferred into the trust by assigning the trust ownership over the asset.
Upon the passing of the trust settlor, the person who created the trust, the assets held in the trust will pass outside of probate proceedings according to the trust terms.
Contact an Estate Planning Attorney
Do you want to learn more about estate planning? Do you want trusted legal counsel to assist in the creation of a strong estate plan? Look no further than Monk Law’s advanced estate planning lawyer. Contact Monk Law today.