When it comes to estate planning, many seek to find a simple and easy mechanism to transfer their assets and property after their death. However, even the most basic estate could require a comprehensive and complex estate plan. As such, it is important to understand the different tools you could use in your estate plan, ensuring your wishes and how you want your assets to be distributed are met.
Creating a will
Drafting a will is an excellent first step in the creation of an estate plan. This document, in simple terms, specifies the transfer of your assets after you die. Additionally, this document allows you to assign an executor of your estate, and if you have children, name a guardian for them.
While a will helps ensure that you will not die intestate, which means that the state will determine the distribution of your assets, it still requires the probate process. Probate is a public court proceeding, allowing the public and creditors to see what your estate entails, where your money is going and who is getting your property. In addition to being public, probate can be both costly and lengthy. As such, many seek to avoid probate altogether.
Including a trust in your estate plan
A trust is more than just an authorization document in an estate plan. A trust is its own legal entity, as it can physically own assets. This is why a trust can bypass probate. But a trust can do far more than just evade probate. It can serve a wide range of needs, such as setting up a fund to provide financial assistance for a special needs child in order to avoid income and estate taxes.
Although creating a trust is more complex than a will in most cases, both documents can function together to provide a secure estate plan. In fact, if an individual has a trust, they are likely to have a will in almost all cases. This is due to a will acting as a pour over in matters where an asset is not included in a trust. Together, these documents function as a catch-all, ensuring that your assets are distributed in accordance to your wishes.
Drafting or updating an estate plan can be a challenging and overwhelming process. Understanding what documents to include can be confusing; however, by getting a better understanding of your wishes and the functions of the available estate planning tools, you could create an estate plan the benefits you and your needs.
