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Tips for keeping the family money in the family

On Behalf of | Oct 13, 2021 | Estate Planning |

The first step is drafting the most basic estate planning document, a will. This legal document outlines how one wants their assets to be divided after they die. And, while, just about everyone, has heard of the document and knows its importance, only about 33% of us actually have one drafted. What is more surprising is that, of the other 67%, 34% said they did not have a will yet because they just have not gotten around to it. This is according to the 2021 Estate Planning and Wills Study. This study was published by Caring.com, and it survey 2,500 Americans.

Why a will is needed for everyone

Simply put, without a will, one’s entire estate (everything one owns, including their digital assets, like social media and cryptocurrencies) are divided according to state law in Florida probate court. This means that someone else, a judge that has never met the deceased and knows nothing of their wants or wishes gets to decide the estate’s fate. This does not mean that having a will avoids probate court. It simply means that the court will follow it.

Probate court

The probate process is expensive and slow. Indeed, it can take two years to probate a will, and after that process, it becomes public. This is why one should consult with their estate planning attorney to figure out estate planning strategies to avoid the process all together.

Naming beneficiaries

To avoid some of the probate process, name beneficiaries for all of one’s assets. Again, include those one’s e-assets or digital assets. For retirement and brokerage accounts and insurance policies, name which heir is the beneficiary. They will automatically flow to those beneficiaries without the need for probate. Some accounts also have transfer-on-death provisions, which act in the same way. This, sometimes, includes bank accounts. Though, keep in mind that these named beneficiaries trump anything in a will.

Convert to Roth

A tip to help heirs avoid taxes is converting one’s Fort Lauderdale, Florida, traditional retirement and IRA accounts to Roth accounts. Traditional account disbursements are taxed as normal income and must be fully withdrawn in 10 years, maximizing those tax penalties. On the other hand, IRA accounts are not taxed because taxes are paid prior to the money being deposited into the account. For those traditional accounts converted to Roth, taxes are paid then, but any future increases in taxes, including increases in account value, are not subject to taxation when the heir withdraws the money.




Photo of Jennifer D. Sharpe