Top 10 Ways to Protect Your Assets with an Estate Plan

No one wants to think about death, but if one of your goals is to protect your assets for your heirs, you need to have a plan. Without an estate plan, the loved ones you leave behind could be mired in years of probate court, an expensive proposition that is the last thing most people want to endure when they’re already dealing with the loss of a spouse or parent. Today, we’re exploring the top 10 things you can do to protect your assets—and it starts with an estate plan.
 

1. Create and Fund a Living Trust

A living trust is a smart way to avoid probate. It is created during your lifetime and designates a trustee to manage your estate while you are alive, keeping in mind the best interests of your beneficiaries. Then, after you die, the assets in the trust flow smoothly to your beneficiaries, avoiding probate.
A living trust can be revocable or irrevocable. Most families start with a revocable trust. With a revocable trust, you can put yourself in charge as the trustee, and make changes whenever you wish. An irrevocable living trust, on the other hand, puts the assets under the ownership of the trust itself, you will be restricted, but these trusts offer tax and liability protection planning options. The latter, however, doesn’t easily allow for changing beneficiaries, so you will definitely want to discuss your options with an estate planning attorney before making a choice one way or the other.
 

2. Update Your Estate Plan on a Regular Basis

To adequately protect your assets, you need to review and update your estate plan regularly. This should occur when you or your family undergoes any changes, such as marriages, divorces, births, deaths, and the like. An estate plan is only as good as you and your attorney have made it, and if it falls out of date or relevance, your assets may not be distributed according to your wishes.
Generally speaking, you should make a plan to review your estate plan every three to five years or when you experience a major life event.
 

3. Speak to Family About Special Assets

Communication is a key component to a well-constructed estate plan, and to protect your assets, you’ll need to speak to your family. You may own a family business, have multiple properties, or have a child with special needs. All of these special circumstances need to be factored into your estate plan. Also, if you have a blended family and ex-spouses, you’ll want to discuss what you’d like to have happen after you’re gone so there is a smaller chance that there will be legal battles between family members or accidental disinheritances (if you don’t set things up correctly, one spouse’s family may inherit everything to the exclusion of the other’s!)
 

4. Don’t Add Additional Owners

As a widowed parent ages, one option they may consider is to add adult children as owners to their properties. In the here and now, it might sound like a good idea, but it could lead to personal financial ruin during your lifetime if that child mismanages the asset or decides to sell it. This can also lead to significant tax and liability consequences. The better choice is to add the properties to your trust. That way, you’ll retain oversight until your death, at which time the properties will smoothly transfer to your children.
 

5. Document Your Mental State

To create and sign a legal document, you must have sufficient mental capacity or competency to understand what you’re signing. One of the biggest reasons a will is contested is due to lack of capacity. If there is any question about your capacity, make sure you get a report from your doctor to prove you were able to create the Will or Trust that is the basis of your estate plan.
 

6. Explicitly Write Out All Gifts and Loans

Don’t leave your wishes to chance. The more documentation you create, the less opportunity there is for confusion. You can structure disbursements to your loved ones as loans or gifts, which will be designated within your estate plan. Discuss with your financial planner or estate planning attorney which is the better option for your family, as both have tax implications.
 

7. Explicitly State Whom You Are Disinheriting

Sometimes, creating an estate plan isn’t just about saying to whom you’re leaving assets; it’s also about to whom you’re not leaving assets. If you want to disinherit a family member, document the specific reasons. This is also true if you plan to give one child a different dispensation than another. The rule of the game to protect your assets is to document, document, document. Depending on your situation, a separate letter may be included with your estate plan, and sometimes even shared with the disinherited relatives before your death (be careful with the latter, as this has been known to create estate disputes before people even die).
 

8. Explicitly List All Personal Property Separately

Do you want your grandmother’s engagement ring to go to your daughter and the Rembrandt that’s been in your family for generations to go to your son? If so, you need to document that all specifically. Create a list to be incorporated into your estate plan.
 

9. Write an Explanation

Explain in a note your thought processes behind your estate plan. This note will accompany your will or trust and, although unenforceable, could prove very helpful, especially if your wishes vary from your heirs’ expectations.
 

10. Speak with Family Members

One of the best ways to create a smooth transition of your assets when you die is to have these difficult conversations with your family members now. The holiday season is an excellent time to do that since they’ll all be together. This allows them to have appropriate expectations and for you to protect your assets after your passing.
 

Protect Your Assets with an Estate Plan

Developing an estate plan is not something to be taken on lightly, and it’s certainly not something you should do on your own. You can protect your assets for the next generation with a well-constructed plan that includes your wishes and keeps your estate out of probate, but don’t procrastinate setting up or making changes to your estate plan!
For more than 30 years, Joel A. Harris has been protecting the estates of families throughout California. If you want some help navigating the ins and outs of protecting your estate or establishing a trust to protect your future, feel free to visit us online, in person, or call us by phone at (925) 757-4605.