What are wills, trusts, and estates?
Whether you are planning for your own future or someone you know recently passed away, you may hear a lot about wills, trusts, and estates. It is important that you understand what each of these things is and the role they may play in your future.
What is an estate?
An estate is everything you own. This includes large items like your house and car, but also small items like your DVD collection and family photo albums. Your estate even comprises intangible things, including your values.
An estate plan outlines what you want to have happen with your valuables after you pass away or become severely incapacitated. In an estate plan, you provide directions, not only for distributing your possessions, but also for whom you want to take care of your minor children and your pets.
What is a will?
There are two main types of wills: living wills and last wills.
A living will outlines your wishes for your medical care if you become unable to make decisions for yourself. A last will is what most commonly comes to mind when people think of wills. It names beneficiaries for various items within an estate. It may also communicate instructions for burial and name guardians for minor children.
A last will must go through probate. Probate is the process that proves the will's validity. The will's executor, the person designated to make sure the deceased wishes are carried out, may have to submit documents that prove the value of an estate. If the validity of a will is disputed, this process may become lengthy.
What is a trust?
Like a will, a trust gives instructions for the division of property. However, a trust may go into effect while the owner of the property is still living. Such a trust may be revoked if the beneficiary does not abide by the rules set out in the trust or if the owner of the property decides to make other arrangements.
There are several types of trusts, some of which offer tax benefits or other monetary advantages for both the trust's beneficiaries and the person who sets up the trust. Setting up a trust is one way to avoid the probate process.
Hiring an estate planning attorney
When you're dealing with wills, trusts, and estates, you may be able to get through the process without professional legal help. However, there are several advantages to hiring a lawyer:
- Each state has its own set of laws for wills, trusts, and estates. A lawyer can help you navigate through local regulations.
- Large estates are subject to federal estate taxes, and a lawyer will be able to help you understand how those taxes work.
- If a will is not a legal document—for example, if it is handwritten or in another format not approved by local laws—a lawyer can help you understand the options for executing the will.
- Trusts are complex, and a lawyer can provide advice on which type of trust best fits a particular situation.
Even if your situation is not particularly complicated, you may wish to consult with a lawyer so you can be sure that you understand the road ahead.