How to Fairly Distribute Assets of an Estate

Planning your estate is never easy, and you may have a lot of questions. From personal belongings to money to real estate, there are several steps you can take to ensure that your affairs will be in order for your family when the time comes to distribute assets. You must determine what to leave, to whom, and the best way to distribute those belongings. There are four basic methods of asset distribution:

• Gift assets before your death.
• Establish a trust during your lifetime.
• Distribution of assets after death through a will.
• Distribution of assets after death outside of a will.

Based on your unique financial situation, each method will have its advantages and disadvantages. It may also be possible to combine these methods in order to accomplish your goal. No matter what you decide to do, you should discuss your options of distribution with an attorney that is knowledgeable in estate law to ensure that everything is set up correctly.

Asset Distribution Options

Once you have made a decision on how to distribute your assets, your next step is to determine who your beneficiaries will be and how you want to leave them your property. This is a personal decision and only you can make it. After all, these are the people that are important to you.

To Have a Will or Not to Have a Will

Making a will is a surefire way to ensure that the people you wish to inherit assets from your estate will actually do so. If there is no will, then the law of intestacy will come in and dictate how your estate gets distributed. If this happens, there is a chance that the decisions made by a probate court may not reflect what you ultimately would have wanted. If you are interested in what happens to an estate after someone dies without a will, check out this blog that details the process for California.

Leaving Everything to Your Spouse

If you wish to leave everything you own to your spouse, there are a couple of ways to accomplish this that will depend on the laws of your state. The first possibility is joint tenancy. This can be a complex option, but might be exactly what your estate needs. Joint tenancy allows for the surviving spouse to inherit all property outside of the will. Holding property as joint tenants avoids the probate process at the time of your death. However, it does not avoid probate at the later time of death of the surviving spouse.

The second option is a type of will that has been termed the “I Love You” will. This is a simple document that leaves all assets to the surviving spouse and then, for example, to the surviving children. Some common language designed to accomplish this may be something like: “Upon my death, I leave my entire estate to my spouse, and upon the death of my spouse, our assets go to our children.”

But, neither a joint tenancy nor a simple will that leaves everything to your spouse will ensure protection to your children. This is because your spouse could either spend or lose all the property, or might remarry and lose control of the assets. These situations could leave your children with no part of your estate whatsoever.

For couples who have divided their property ownership equally between themselves, a complex will is a great option. In this case, the will directs property, typically real estate but not personal residence, to the children with lifetime use and enjoyment for the surviving spouse during his/her lifetime.

Children from a Previous Marriage

What if you have children from a previous marriage and you want to make sure part of or all of your assets go to them? You can have this done in several different ways.

You may use your will and be specific of which gifts or shares of the estate go to them. You should also be mindful that this type of gift will bypass your spouse and, in some circumstances, may lead to family conflict.

Another option is setting up a trust. Trusts are often the best way for cutting financial ties between a current spouse and grown children from another marriage. One type of trust that is often used is known as a qualified terminable interest property (or QTIP). A QTIP is used to transfer assets to children from previous marriages. What this basically does is provide support for your surviving spouse during his or her lifetime, but then controls the distribution of the estate after your spouse’s death.

If you worry that your spouse will outlive the assets set aside in the trust (QTIP), you are able to stipulate the annual income from the residual go to him or her. Setting up a trust like this with a residuary stipulation probably will not eliminate all the tension that can arise in the family once you are deceased, but it may ultimately help remove confusion.

Equal Distribution to Your Children

What would happen if you passed away without a will and had children but no surviving spouse? In most cases, your estate would be divided equally between your children. If this is not what you want, then you need to make a will that clearly states what parts or percentages of your estate should go to each individual. For example, you may have three surviving children but feel that one child has a greater financial need than the other two. In such a scenario, it would be possible to leave 50% of your estate to one child and 25% each to the other two.

Your Parents Survive You

If you want any of your assets to go to your parents, it is important to make a will that expresses this desire. If there is no will set up, the court will most likely transfer a third or half of the assets in your name to your spouse and the rest over to your children. Depending on the state you live in, half of your assets may go to your surviving parent if you have no children. If your will specifies which parts of your estate you would like to go to your parents, it would also be a wise choice to have alternate beneficiaries in case your parents do not survive you.

Distributing Personal Belongings

Often, after someone passes away, the separating and sharing of personal items can become an emotionally involved issue amongst potential heirs. Personal possessions like jewelry, dishes, or other belongings may carry individual significance to each of your loved ones. It is possible to create a will that takes these considerations into account and specifies which items will be handed down to particular people. Otherwise, this task is often left up to the surviving family to decide and may become an unpleasant and contentious process. Consider the personalities involved among your potential heirs before deciding to let them fend for themselves after your death.

No matter how you look at it, planning your estate is never an easy task. It is best to talk to an attorney who specializes in estate law. It is also important to discuss your options with your family. Doing so could ensure that there are no surprises later and maximize the possibility that everyone will be content with your wishes.

This blog has focused on the creation of a will, but there are several other important documents to set up in a comprehensive estate plan. If you want more information, schedule an appointment with Ventura Estate Planning Attorney Dan Higson or check out his California estate planning checklist here.

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