We do not typically have much control over what happens after we die – we can respectfully ask those we love to take care of each other and do with our bodies as we wish, but there is not much of a way to maintain any real grasp over what really happens when everything is said and done, and the flatline begins.
That is why, in our modern society, there are legal tools in place to ensure that a person’s final will – what they want done after their death – must be executed. And beyond a will, there are other tools with which someone can give legally-binding instructions on what should be done with their estate after their death. This is where estate planning comes into play.
Basics of Estate Planning
Estate planning is all about structuring the future distribution of your assets. This can be done in a variety of ways, each with its own list of pros and cons, and each with its own legal considerations and tax boons/banes. If you own anything at all – a home, a car, a boat, a tract of land, financial instruments or even a sizeable bank account with no means of spending every penny – then at some point you will want to ask yourself exactly what you want to do with all of it, and how.
There is an entire industry built around helping people manage and successfully distribute their estate in a way that fulfills all their wishes – and the more you own, the more complicated things are bound to get. Making the right choices means having an overview of how estate planning works, and what you can and can’t do.
For the most part, there are two ways in which your assets can be distributed – the last will and testament, and the living trust. A will is typically any document made legally-binding through your signature and the presence of several witnesses. Without a will (or any other estate planning tool), your assets will be distributed based on your state’s law of intestacy. A will should outline what is to be done about your inheritance. It specifically allows you to:
- Enable you to keep your assets from being distributed to certain eligible heirs.
- Determine exactly who will receive what asset (even if they are not your heir).
- Select a guardian for any minor children you leave behind.
- And more.
A living trust is a little more complex than a will, and has a wider range of applications (and quite a few differences). Firstly, a will only goes into effect once you die. The effects of a trust are immediate upon signing your trust. Unlike a will, anything you own or have rights over can be transferred into a trust. This includes life insurance policies, your portion of a co-owned property, and more. A trust can also be distributed upon mental disability, rather than only upon death, unlike a will.
There are other ways to plan for your estate, such as including beneficiaries on payable-on-death accounts and more – yet for the most part, the will is the most common tool when it comes to determining where your belongings go after you have passed, with the trust being a close second.
Last Will and Testament
Creating a will is as simple as contacting your lawyer for a basic template, and then imbuing it with all the information you feel you need. A will must be signed in front of several witnesses to effectively pass probate, which is the process by which a special court determines whether a will is legitimate. Knowing what a will can and cannot do is the first step to creating one – you will have to have a plan of what you want to do with your assets, after first knowing how much control you have over your belongings with a will.
With a will, you can determine who will take care of your children (if they are younger than 18), who will administer your estate, and who will and won’t receive your assets and property. It cannot determine how some assets are distributed (rights to a jointly-owned property, accounts and insurance policies), and it cannot be used to gift property and assets within a living trust.
Administering your will is the estate executor – this is a person in-charge of ensuring that, after your death, things go as you planned them. Think of an executor to your will as your representative after death. Your executor will be tasked with finding and keeping your assets safe, taking care of your property before it is distributed, and they will handle the filing of your will in probate court. Once your will is found and filed, the probate process will begin.
Your executor will play a significant role in your probate, which is why some people appoint their lawyers as executor or instruct their most trusted person to choose a lawyer to handle these duties. Probate can be lengthy, and expensive – but it can be avoided as well.
Probate Is NOT Always Necessary
While a will is preferable to not engaging in any estate planning, in many cases it’s better to avoid the troubles of probate altogether by choosing to set up a trust – especially if you own several properties, or have a complicated array of assets.
Not only can a trust be funded with everything you own, but it also allows you to exert more thorough control over exactly how your belongings will be distributed (allowing you to even provision certain ownership rights if you have minor children and don’t wish to give them all their inheritance at once), all while keeping the information private and avoiding probate.
A will, on the other hand, will become public record over the course of probate which may not appeal to some people’s sense of privacy.
There may be cases when a will is simpler to write up – yet if you possess a considerable estate or do not wish to see any of your inheritance spent in the probate process, then the best way to ensure that your beneficiaries receive everything you intend for them to receive is through a living trust. Setting one up is not all that difficult with the right help, and in the long run this will help you save much more than if you decide to go through the troubles of probate.