Everyone should create an estate plan, regardless of how old you are or how many assets you have. It helps ensure that what you have is given to the proper people after you pass away, and will prevent assets from being given to people that you do not agree with. Proper estate planning will allow you to come up with a plan that works for you, but you may have the following questions before you get started.
What Happens When You Are Not Prepared At All?
If you do not have any type of estate planning done at the time of your death, your estate will be subjected to the laws in your state when it comes to what happens. A court will have to appoint someone as the executor of your state that will take care of essential tasks. This includes figuring out who you owe money to, who your heirs are, creating a new bank account for your estate, and making necessary payments until things are wrapped up. For example, someone will still need to pay for utilities, your property taxes, and the mortgage on your home if you have one outstanding.
What Is A Basic Will?
A will is the simplest way to come up with an estate plan. It is a document that provides simple instructions for how assets are distributed, and wishes for what happens to your children, pets, and other dependents. A testamentary will should be the type of will that should create, which is one where you write out your wishes and the creation is documented by witnesses.
However, be aware that estates go through probate either with or without a will. If you have a will, probate is used to prove that your will is valid. After all, there may be several different wills out there as you revised it over the years. Probate also has many costs associated with it, which includes fees for going to court, for attorneys, accounting, appraisals, and bonds.
What Is A Trust?
The way a trust works is that a trustee, typically a third party, holds onto your assets until you pass away. This allows probate to be bypassed, since the trustee can immediately give your heirs access to those assets after you pass away. While a trust is more complicated and more expensive to set up when compared to a will, the process of dividing assets will be much easier for everyone involved.
Revocable trusts allow you to make changes to the terms of the trust up until you pass away, and an irrevocable trust cannot be changed after the trust is created. Why create an irrevocable trust? It has some benefits in terms of tax avoidance, since it removes those assets from your estate while you are alive. For example, if you had a court judgement ruled against you where assets were to be seized, those assets in an irrevocable trust would be safe.
Be sure to contact an estate planning attorney if you have any questions.Share