Planning for the distribution of your estate is an integral part of managing your assets. After all, you want to leave your hard-earned estate to the rightful heirs, and make sure that they will receive it. Estate planning is the act of apportioning your properties and assets – your home, car, bank accounts, and other valuables and properties – to your designated heirs. Your beneficiaries can be persons that you care about or organizations that mean a lot to you.
You have spent years growing your estate, and it is only right that you should consider getting help with an estate planning attorney. It is not just about its physical or monetary value, but it also holds a degree of sentimental worth that your heir will surely treasure and care for.
What’s Better: A Will or a Trust?
Many people do not fully understand the difference between a will and a trust. They are sometimes confused to mean the same thing. Although both are beneficial means of estate planning, they serve a different purpose.
A trust is an estate planning arrangement wherein you, as a trustor, appoint a second party (a person or an institution) known as a trustee, to hold the assets and other property titles on behalf of the third party, the beneficiary. It aims to provide legal security for the trustor’s estate. A trust is valid as soon as you create it, even if you are still alive.
In contrast, a last will and testament, or will for short, is a declaration of your final wishes as to how to distribute your properties after you are gone. An executor is assigned to manage the estate and oversee its final distribution. When one dies without a will, the properties and assets will be left for the government to manage. Sometimes, it may even wind up as state or government property.
Depending on your situation, a trust or a will could be more beneficial for you. Your estate planning attorney can help you make the best informed decision. Should you want to avoid probate and have more control of how and to whom your estate should end up and when, trust would be a good option. With it, your financial affairs are kept private, and court intervention is kept at a minimum. Trust is generally more adjustable than a will. The downside is that it costs more to organize.
A will costs less to set up and change or dissolve. If you are 60 years old and below, have minors under your care, have children or grandchildren, and cannot actively handle your estate plan, a will would be a more sensible choice for you.
Check Your Beneficiary Designations
It is advisable to review and update your beneficiaries at least once every year or after significant life events. Marriage, birth, death, or divorce is a major event in life that warrants beneficiary designation review. If you switch retirement plans, you must also keep your beneficiary designation up to date.
Moreover, as time goes by, different scenarios unfold, and you want to make sure that your beneficiary designations still make sense. An estate planning attorney can assist with re-designating your beneficiaries.
What Happens If I Leave Behind a Debt?
Debt is a debt, and it needs to be paid, even if you’re gone. With that said, payment for your outstanding debt will be taken out from your estate. In case your estate is not enough to cover the liability, the co-signers and guarantors of such obligation will be held responsible for it. In some states, the joint or conjugal property may be accountable as well.
Your appointed executor will be entrusted with the debt payment using the estate assets passed through probate. Take note that debt cannot be paid to the creditors if the asset passes straight to a beneficiary. The same goes for a joint bank account or an insurance policy, wherein assets go straightway to the joint owner and policy beneficiary, respectively. You may ask your trusted estate planning attorney for a more detailed explanation regarding this matter.
What are Revocable Living Trusts?
A living trust is selected mostly to dodge probate, which is an expensive and time-consuming process. The revocable living trust, as explained earlier, serves as the legal entity that holds and manages the property and assets. It is revocable because the trustor still has the ultimate control over the estate.
The advantages of having a revocable living trust are:
- It avoids probate
- It minimizes the chance of court challenges over your assets and properties
- It avoids conservatorship should you become physically or mentally incapacitated
- It keeps your financial affairs private
Consult your estate planning attorney if you think that court despite might happen over your estate when you are gone. It can help prevent any unwanted incidents from happening and ensure the smooth transfer of your estate.
How to Change or Update an Estate Plan
Aside from updating your designated beneficiaries, updating your estate plan is equally critical. Many things change as life goes by:
- You moved to another state, which holds a different estate planning law
- There has been a change or addition to your family structure
- There has been a change with your assets and liabilities
- Your retirement plan has changed
- You change your executors and trustees
Your estate planning attorney can help you create drafts and update your estate planning documents. With the help of a professional attorney, you can have peace of mind knowing your estate will be handled and distributed in the way that you choose.