You have worked hard to build your wealth. If you want to preserve your assets and protect your family’s future, an estate plan is essential. Even if you don’t have a large or complicated estate, you may benefit from various estate planning strategies.
Your Azzad adviser can help you design an estate plan that is personalized for you and your family. Your plan can help protect, preserve and manage your estate if you die or become disabled.
A personalized estate plan can enable you to:
- Ensure that your wealth is passed on to your desired heirs without delay
- Specify who will care for your children who are minors or who have special needs
- Help your heirs minimize estate taxes and other transfer taxes
- Avoid the cost, delay, publicity and inconvenience of probate
- Avoid disputes among family members, business partners and third parties such as the federal government
- Protect your hard-earned wealth from future potential creditors
- Leave a lasting legacy by providing for your favorite charity or cause
Five steps to estate planning success:
Perform an inventory of your financial life
Use our estate planning worksheet to take an inventory of your assets, liabilities, current beneficiary designations and professional situation. Along the way, make sure you update the existing beneficiaries of your retirement accounts.
Define your estate planning goals
Your Azzad adviser can help you define your estate planning objectives. For example, what assets do you want to put aside for your children’s ongoing education? Who do you want to manage your affairs if you become disabled? What charitable institutions do you want to receive benefits? To whom do you want your assets distributed and in what proportions?
When defining goals for your estate plan, keep in mind how taxes, probate, liquidity, incapacity and designated beneficiaries could affect the distribution of your estate.
Pick a winning team
Designing and implementing your estate plan requires the expertise of a qualified estate planning team. This is especially true for larger, more complicated estates. Your Azzad adviser can help you manage relationships among your attorney, accountant and others to help simplify the process.
Create and implement your personalized plan
Based on your goals, your Azzad adviser can help you consider various estate planning strategies and help coordinate with your attorney, who will prepare any legal paperwork that might be needed. For example, if an irrevocable trust is appropriate, you will need an attorney to draft the necessary documents. Your adviser will assist you in establishing and managing your trust according to your goals. Make sure you keep your documents organized and within easy access.
Keep your estate plan on track
After you’ve implemented your plan, you should perform periodic reviews. You may need to make changes to your plan to reflect changes in your life or in tax laws.
Your Azzad adviser can help you put your estate plan into action and keep it at its best.
Estate Planning Strategies
You may want to consider one or more of the following estate planning strategies:
Create a will
- A will should be the foundation of your estate plan. This document outlines how you want your property distributed after you die, who will administer your estate and who will care for your minor children.Keep in mind, however, that assets distributed through a will must still go through probate. Probate is the legal process of settling an estate during which the validity of the will is proven, the deceased’s assets are collected and accounted for, debts and taxes are paid and remaining probate estate assets distributed. Probate may be costly and time-consuming for larger estates.
Hold assets in a trust
- A trust is a separate legal entity that holds (owns) your assets, which are then used to benefit the trust’s beneficiaries. There are many types of trusts, each serving a different purpose. Revocable living trusts offer flexibility while irrevocable trusts can help you save money on estate taxes.
Revocable living trusts
A revocable living trust is a legal entity you create while you are alive. It is primarily used to transfer assets directly to your heirs, avoiding probate which can reduce value, delay payments and be open to public scrutiny. How you choose to fund your trust depends on your goals.
Benefits of a revocable living trust
- Can ensure that your financial affairs are properly managed if you become incapacitated
- Avoid probate since the assets pass directly to your heirs
- May lessen potential challenges to or elections against a will
- Maintains your privacy because it avoids public disclosure of your financial affairs
- Can help your heirs avoid ancillary probate if you have out-of-state assets (such as real estate)
- May be changed, dissolved or amended at any time
A revocable living trust generally cannot accomplish the following:
- Minimize income, gift or estate taxes
- Shelter trust assets from creditors
- Be named the owner of your retirement account. (A change in ownership would be deemed a taxable distribution, and your account would lose its tax-advantaged status.)
How a revocable living trust works
You and your attorney create the revocable living trust. Typically, you name yourself as the trustee and sole beneficiary during your lifetime (if married, both spouses can be named beneficiaries). You, the grantor, should also name successor trustee(s) or co-trustee(s), as well as beneficiaries who will receive any assets that remain in the trust upon your death. A spouse or child may be named the successor or co-trustee and may also be named as the ultimate beneficiary.
Then you must fund and manage the assets of the revocable living trust. Your Azzad adviser can help you set up an appropriate investment plan to manage your trust assets based on your unique needs. You may also want to transfer legal title from your name to the name of the trust any other assets you wish to include in the trust—such as real estate or checking accounts.
Pay any applicable taxes that the trust may incur. Any income earned or expenses incurred by the trust flow directly to your (the grantor’s) individual income tax return. That means you are responsible for any taxes or expenses generated by the assets in your revocable living trust account. Note that upon the grantor’s death, the trust becomes a separate taxpayer, and different income tax rules apply.
Should you have a revocable living trust?
Bypassing probate might not be an appropriate goal for everyone. For smaller estates, it might not even be an issue. In some cases, the costs associated with a living trust could actually outweigh probate costs. For other estates, a revocable living trust may be an important estate-planning tool. Remember, establishing a living trust requires the special services of a trusted attorney.
Your Azzad investment adviser can help you decide if a living trust is right for you.
Establish a Transfer on Death account
Assets owned in joint tenancy with rights of survivorship pass automatically to the surviving joint owner at your death. However, the joint owner has immediate, ongoing access to your property, and your joint owner’s creditors could reach the jointly held property. That is why, for some people, a Transfer on Death (TOD) registration could be more appropriate.
Registering your Azzad investment account as Transfer on Death (TOD) could be a useful estate-planning tool. A TOD will allow you to avoid the costs and delays of probate by establishing a list of beneficiaries. Upon your death, the assets in your account will be transferred directly to your heirs.
Who is it for?
This service is available only to residents of states that have adopted the Uniform Transfer on Death Act. If your primary residence changes to a state that has not adopted this Act, the designation will become void.
How does it operate?
You can choose to register your investment account as TOD. You name beneficiaries to receive your account’s assets and indicate what percentage of the assets each beneficiary should receive. When you die, your assets will go directly to your designated beneficiaries instead of passing on to probate. As long as you are alive, your beneficiaries have no control or access to your account. You may also change your designated TOD beneficiaries at any time.
How can it save you money?
Probate can be costly and time consuming. By registering your investment account as TOD, you may save your heirs time and money. Keep in mind that any assets received in this manner could be subject to possible federal (perhaps state) estate taxes.
To find out how a TOD account can fit in your overall estate plan, call 888-862-9923 to speak to your Azzad investment adviser.
Designate beneficiaries: Periodically review and update the beneficiaries of any retirement accounts you may hold. If you choose to designate a beneficiary to your retirement account other than your spouse, make sure you understand the possible consequences of your decision.
Give outright gifts while you are alive: A gift is a transfer of property that you make during your lifetime to family, friends or charity. Making gifts can be personally gratifying as well as an effective estate planning tool.
Note: This information is not intended as tax or legal advice. For more complete guidance on your particular financial situation, please consult your tax adviser or speak to an Azzad investment adviser at 888-862-9923.