If you worked hard all your life, you don’t want to end up with the state taking control of everything. Even worse, your assets could get stuck lingering in probate for years for something as simple as a spelling mistake. With proper estate planning, you can ensure your heirs get everything you want them to receive as soon as possible and with less financial penalty. Whether it’s hiring estate planning attorneys or understanding how gifting can work, there are many ways you can save on probate costs.
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Understand the Costs
First of all, you should understand that the probate process isn’t free. According to Legal Zoom, probate expenses can cost up to 10% of an estate. Once you understand the cost, you should consider how much of your assets you want to be left available for probate to handle. In addition to costs, your beneficiaries have to wait a while after your passing.
Transfer on Death Deed
Do you own properties, such as a home or rental investment, that you want to leave to a specific beneficiary upon death? If so, you can make things easy by using a Transfer on Death (TOD) deed. This is a legal document that says the heir, who’ll receive the property, shall immediately do so upon your passing, without having to deal with probate.
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Keep Estate Under Certain Value
Be mindful of what your state laws set as the asset limits to go through the full probate process. For some states, it may be as low as $10,000, but for others, the limit may be $275,000. Your local estate attorneys will quickly be able to help you with this limit.
Start Gifting Assets Before Death
You can use the art of gifting as a way around the probate process. If you have any vehicles, you can always give it to your child or grandchild. In the case of property, if you don’t want to use a TOD, you can add an adult child as a joint tenant with the right of survivorship to your home as well, according to Justia.
There are tax implications if the gift is over a certain amount when using cash. The receiver doesn’t pay any tax unless it’s a gift that can appreciate, such as certain investments. The giver will pay a gift tax if it exceeds the annual exclusion limit, which can change annually. According to Fidelity, the annual exclusion limit for 2023 is $17,000.
Create a Trust
Going through probate isn’t your only option for legally transferring assets to heirs. Probate is a requirement if you have a legal will. However, if you create a trust instead, your beneficiaries won’t have to pay probate fees once they receive their inheritance. Those probate fees are higher than the administration costs of a trust.
Understand Charity Tax Credit
Is there a charity you strongly support and wish to give some of your assets to? Luckily, those gifts are excluded from your taxable estate. Just make sure the charity is a legal 501 organization. According to our experts, you can donate as much as you like to your charity of choice from your estate.
Get Legal Assistance
Regardless of the size of your estate, you should get legal assistance to make sure you’re doing everything correctly. Estate planning attorneys are available to answer all the questions that you have. They can go over what your taxable limits are, whether it’s for gifting for charity. If you’re unsure whether a will or a trust is best for your assets, your estate attorney will walk you through that process and help you plan which document you decide to use.
In our experience, there are still many Americans who haven’t planned an estate. If you want to take care of your loved ones, the best thing you can do is create a document that spells out what your final wishes are. Probate can last for years and result in extra expenses. The more planning you do, the less waiting and expenses your loved ones will have to deal with. Do the right thing and take the next step to protect your assets. Contact our team at Nelson Elder Care Law today to talk to one of our experienced estate planning attorneys.
