If you are married, you likely want to ensure that your spouse is financially secure if something happens to you. Without careful planning, however, a significant portion of your estate could be lost to taxes and/or your spouse could be forced to wait months until the assets you owned are available. To help you better understand, a Grand Forks attorney at Thompson Law explains how to use your estate plan to protect assets intended for your spouse.
What Happens to Your Estate in North Dakota Without an Estate Plan?
One of the most important reasons to have at least a basic estate plan in place is to avoid leaving behind an intestate estate. Doing that is effectively allowing the State of North Dakota to create your estate plan because your entire estate will be distributed using the state intestate succession laws. If you are survived by only your spouse, meaning no descendants, then your spouse will inherit your entire estate. If you have any living descendants, however, the distribution of your estate gets more complicated. Therefore, if your intent is to leave everything to your spouse you need an estate plan in place.
You Need to Protect Assets Intended for Your Spouse
Simply making sure that your spouse will be the beneficiary of your estate assets is not enough to ensure that your spouse is fully protected. You must make sure that the assets you plan to pass on to your spouse are protected so that he/she receives the full value of those assets. One of the biggest threats to the inheritance you plan to leave for your spouse is federal gift and estate taxes. At the rate of 40 percent, a significant amount of your estate could be lost to Uncle Sam before your spouse receives anything.
Why You Should Not Rely Entirely on the Unlimited Marital Deduction
The unlimited marital deduction allows a taxpayer to leave an unlimited amount of assets to a spouse tax-free at the time of death. Allowing assets to pass directly to your spouse without those assets being subject to taxation. It is not wise to rely entirely on the unlimited marital deduction if your goal is to protect assets meant for your spouse. If you made significant gifts during your lifetime, taxes owed on those gifts may be collected from your estate which could still diminish the value of the estate passed on to your spouse. In addition, leaving all your assets to your spouse may only prolong the payment of taxes. If the collective value of your estate combined with that of your spouse exceeds the lifetime exemption, taxes will ultimately be collected by Uncle Sam when your spouse passes away. Careful estate planning may be able to avoid some or all of that tax burden.
The Importance of Avoiding Probate
Another reason to have a properly drafted estate plan in place to protect assets earmarked for your spouse is to ensure that your spouse receives those assets in a timely manner. Without incorporating probate avoidance tools and strategies in your estate plan, your estate could spend months, even years, in probate. Meanwhile, your spouse may not have access to much-needed funds and assets. Probate avoidance strategies, such as converting assets to non-probate assets, incorporated into your estate plan can easily resolve this potential problem. Leaving assets to your spouse in a living trust, for example, instead of gifting them in your Will, ensures that they can be distributed immediately after your death without the need to go through probate.
Learn More about How to Protect Your Spouse
Please join us for an upcoming FREE seminar. If you want to learn more about how to protect your spouse using your estate plan, contact a Grand Forks estate planning attorney at Thompson Law by calling 605-362-9100 to schedule an appointment.
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