An estate is a legal term for the combined assets, property, and finances of an individual. This allows the government to legally define your overall net worth.
Knowing what an estate is and what to do when a deceased person’s estate passes to their chosen heirs and beneficiaries is often crucial. By understanding these procedures you can effectively handle the probate process and plan your estate effectively for the future.
What Assets Do Estates Cover?
An estate basically contains all of your financial holdings and responsibilities. This means all your assets and your debts.
When you die, your worldly assets are assessed and your net worth calculated. your financial situation and property will be taken into consideration. This will be measured against any debts that you hold to come to the final amount contained within your estate.
So what is really in an estate? Usually, it will contain the following:
- Real estate
- Bank accounts
- Cash savings
- Stocks and shares
- Personal property
- Additional assets
- Debts and liens such as mortgages
What Happens to An Estate After You Die?
Before your assets can be passed on to your heirs, the net worth of your whole estate has to be assessed. In some cases, it may also be subject to state and federal taxes.
Many estates will pass into probate. This is a court-managed process that manages the passing of wealth from one generation to another. This will calculate the total worth of the estate and deduct any taxes owed before the heirs may receive it.
However, not all estates will be subject to probate. Some, such as those managed by trusts, can bypass the procedure.
What Types of Estate Are There?
There are a couple of different types of an estate that are assessed when a person passes away. These include the following:
Probate Estate Most estates are Probate Estates, which means that they are subject to probate procedures. This applies to states where money and property are passed to heirs via a will or the estate is intestate (where no instructions are given by the deceased).
- Trust Estate Some estates are classified as Trust Estates. This is used when all a deceased person’s assets are kept in a trust and simply means that they do not have to enter the probate process. However, Trust Estates are still assessed by the IRS and are subject to Estate Tax if they exceed a certain amount.
What Legal Documents Can Help You Plan Your Estate?
Planning your estate is an essential task to ensure that your family and heirs can easily access and manage your property and money at the end of your life.
This creates clear instructions on who you would like to pass the contents of your estate to and can speed up the process as a whole.
There are a number of important legal documents that can help you with your estate planning, including: