You do not have to have a lot of money to start estate planning now. Everything you currently own is considered part of your estate, and it might be large or small. It is a good idea to think about what will happen to it if you pass away suddenly. the process refers to determining who will handle your responsibilities and receive your money if you pass away.
Ensuring Family Members Receive Your Assets
If you have debt, you might wonder what will happen to it once you pass away. Generally, your debt can’t be passed on to other family members once you pass away. Still, your estate might be responsible for it, and that could significantly reduce the amount of money your loved ones receive.
If the estate has the assets to pay off things like credit cards and student loans, the funds will go toward that before the other money can be distributed among family members.
One way to ensure your loved ones receive all the funds you had intended to leave them is by taking care of the debt before you pass away. For example, if you have debt from school, you might consider refinancing that student loan into a new one with the help of a
private lender. You can use a loan refinance calculator to see how much you can save once you begin repayments. One of the advantages of refinancing is that you can sometimes receive a lower interest rate, especially if your credit has improved.
Gifting Your Money Wisely
If you want to ensure that your funds will stay in your family, you might want to consider giving funds to your heirs now, when you are still alive. You can give each person several thousand dollars each year before you have to worry about it being taxable.
By giving away parts of your estate now, it will not have as much taxable value when it is time to divide up your assets. You can create a category for your budget to be able to afford this expenditure with minimal financial strain.
Create a Will
While it might seem obvious, many people do not create a will before they pass away. Some people don’t create one because they feel they do not have enough assets to make one worthwhile.
Still, if your estate does not have a will, your assets will need to get distributed in probate court, and that could cost a lot of money, reducing the amount you gift your beneficiaries. Once you have created a will, you should also check it every now and then.
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Create a Trust
If you do not think your heirs should receive all your funds at once, you might want to set up a trust with a trustee who will then distribute your funds. You can set them up in several ways, but a permanent trust could offer more tax advantages.
Once the funds are in the trust, the assets belong not to you, but to the trust. That means you will not need to pay estate taxes on it, and you can determine how it is used. Even if you are still alive, it is possible to distribute funds form the account.