When an individual dies, their estate enters a process called probate. A legal requirement for every U.S. citizen, a probate court will oversee the estate’s distribution and work to settle matters over the decedent’s assets, property and debt.
Alongside the estate administrator, the courts will also navigate will disputes and claims against the estate. Satisfying these claims may require an administrator to liquidate estate assets or property. So what can one do to protect these assets and preserve more of the estate for its heirs?
The role of the administrator
A decedent’s will may designate a personal representative to serve as the administrator. In the absence of a will, the probate court chooses the administrator. This individual is responsible for collecting all relevant information about an estate and working with the court to process the financial matters of death. The estate administrator job requires a lot of work in tracking down assets, but a comprehensive estate plan can help considerably.
Tactics to protect assets
A well-designed estate plan can help heirs preserve their family’s property. Attorneys tasked with drafting these plans often use these four tactics:
- Joint property: An administrator may need to liquidate high-value assets to satisfy outstanding debts. Listing a joint owner for the family home, vehicles or other property ensures these assets pass directly to the joint owner upon death.
- Trusts: Trusts are tax-free havens for assets or cash. Individuals can choose from many different trusts, each with their own rules for asset distribution and taxes.
- Individual Retirement Account (IRA): Retirement accounts work well for those looking to fund a retirement lifestyle but do incur taxes when they pay out after death. Setting up a Roth IRA, the account holder pays taxes up front, allowing their heirs to access the funds without penalty.
- Gifting: Gift laws changed as recently as 2017, increasing the cap on the value of tax-free gifts an individual can give. Once a year, a person can give another up to $14,000 tax-free.
Draft an estate plan today
Those looking to preserve their estate for their heirs can reach out to a local lawyer familiar with estate planning for help. An attorney can work with banks and insurance companies, draft all relevant estate planning documents and even serve as the estate administrator.