Labor Day has been around since the late 1800s after it was deemed a federal holiday in 1894. Labor Day has pretty much always been observed the first week in September. The holiday celebrates the achievements of the American labor force, and citizens get a day off to reflect on how hard they have worked.
You’ve worked diligently to get where you are, and you need to ensure that you are protecting your assets and accomplishments. The legal system provides documents and tools to serve as asset safeguards. In this article, in honor of Labor Day, we’ll discuss the protections that estate planning offers your hard work.
Estate Planning 101
While estate planning is a way to prepare for the distribution of your assets after you die, that’s not all this legal field is about. There is another side to estate planning that is just as important: the protection and preservation of assets. This includes minimizing tax obligations on your assets so that your heirs get the most out of your estate after you’re gone.
Estate planning helps you protect your assets by providing a framework in the event that you’re incapacitated. Though estate planning is vital after death, it also is important during life.
An estate planning attorney can help you minimize your tax obligations (legally) by navigating the tricky tax code. There are loopholes and maneuvers that a savvy attorney will recognize, but it takes a lot of experience to minimize taxes to the full.
Asset protection also comes in the form of protection against lawsuits. This does not mean protection against getting sued (lawsuits are common in a litigious society like America’s), but estate planning can help take your assets out of the reach of a lawsuit. There are legal vehicles (trusts, for example) that take the assets out of your name and protect them. Once that money or property is beyond reach, there is also a chance that someone’s motivation to sue you might drop.
Let’s start with one of the most common documents associated with estate planning: a will. A will is a legally enforceable document. This document spells out how you want your assets—whether personal or financial—distributed when you die. The will sets the parameters of and parties to which the property will transferred. This is the easiest and cheapest way to start an estate plan.
However, a will is, by no means, the be-all, end-all of estate planning. Even with a valid will, you still have to go through the drudgery and expense of probate court. A trust is one way to avoid probate court.
Trusts are three-party fiduciary relationships that involve you (the donor), the person to whom you want to transfer property (the beneficiary), and a third party who holds the property/asset until you want the beneficiary to have it (known as the trustee). There are many, many different types of trusts, but two of the big ones to know are: inter vivos and testamentary.
Inter Vivos Trust
As you may have guessed (if you have a rudimentary knowledge of Latin), this trust is created while you are still living. You transfer your assets into the trust, and this protects your money while you’re alive. If you choose to make your inter vivos trust revocable, it can be changed, amended, or even cancelled. But, if protecting your assets is the #1 priority, you consider making the trust irrevocable. An estate planning attorney will help determine which is best.
Conversely, a testamentary trust is created when you die. In a trust document, you express your wishes as to how you want your property distributed upon your death. When you die, those wishes are honored. A trust is not only a great way to protect assets from legal challenges, it also can help you avoid probate court.
This brief overview has hopefully helped you realize that estate planning and asset protection offer a lot of protections to conscientious workers looking to safeguard what they have worked their whole life to have.
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