When Should You Get an Estate Plan?
While estate planning is generally associated with the very wealthy, it can be highly beneficial for everyone. It is recommended that those of legal age should create an estate plan. This is because once an individual turns 18, they are more responsible for things like finances, family, power of attorney, and more.
When creating an estate plan, consider:
- Your finances
- Property you own
- Property you own with a spouse
- Property after a divorce
- Property if you have remarried
If you have children, consider:
- Who will become the legal guardian after your passing
- Who will be responsible for their financial security
- Who will inherit your money
- Who will inherit your property
To ensure that your finances, property, and family are taken care of after you are gone, update your estate plans every 3 - 5 years so it is consistent with any major changes in your life.
Wills and Trusts
Both wills and trusts lay out how you want your property to be handled after you have died. However, these two legal instruments are very different from each other, with trusts going beyond property management to guidance regarding finances, your healthcare, and more. One of our Bowie wills, trusts, & probate attorneys can educate you on what kind of estate planning devices will work best for your circumstances.
A Last Will & Testament
A will, short for “last will and testament,” is a relatively simple document that takes effect after you die. It can provide instructions as to:
- How and when you want your assets and property to be distributed
- Who should take over as guardian and inheritance manager for your minor children
- Who you would like to take over your business
- Any other property-related matters
In your will, you will name the executor of your estate, whose purpose is to ensure your wishes are carried out according to your instructions. Your executor’s responsibility will be to gather or identify your assets, pay off your debts and any taxes owed, and distribute what remains to your heirs and beneficiaries per your instructions. A will can help prevent disputes between family members and make other legal decisions easier. If you fail to have a will in place when you pass away, you will die “intestate,” which means your assets and property will be distributed by a judge according to state laws—without any input from you.
Like wills, trusts help you outline your wishes regarding asset distribution, but they have other advantages as well. In some cases, for example, a trust can help your beneficiaries avoid probate because the assets and property named in the trust can be passed on immediately by the designated trustee.
A trust is created when you transfer your assets and property into a separate legal entity with a named trustee to manage it for the benefit of your beneficiaries. Trusts can be set up for various purposes and can dictate both how and when assets will be distributed.
Examples of different kinds of trusts include:
- Asset protection trusts (which shield property from creditors)
- Living vs. testamentary trusts (going into effect immediately vs. upon death)
- Revocable vs. irrevocable trusts (changeable vs. permanent)
- Charitable trusts (to distribute assets to designated charities)
- Special needs trusts (set up for the protection of a dependent with a disability)
- Spendthrift trust (which keeps most of the assets over a set period of time with scheduled distributions; protects the beneficiary from losing the entire amount to debt collection or poor decision-making)
What Is Probate?
Probate is the process in which the court oversees the distribution of your assets to your beneficiaries after you die. If you have a will, the court will verify it and conduct the distribution according to the will’s contents. If you do not have a will, the court will rely on state law in conducting the distribution. Similarly, the court will assign an executor if your will does not appoint one.
If you have been named as the executor or personal representative of the estate of a deceased relative, you may need legal assistance in probate administration. As the executor, you will be responsible for:
- Locating and identifying all of the property and assets
- Having those assets appraised for value
- Handling any disputes among beneficiaries and others involving the estate
- Paying off the debts and other expenses of the estate
- Distributing the remaining property and assets to the heirs and beneficiaries
Probating an estate can be a complex matter. Having the legal advice and guidance of an attorney can help you better understand your obligations and legal rights.