What is the will and estate planning process?
Studying the will and estate planning process is a good idea no matter your age. Familiarizing yourself with the basics of wills and trusts will prepare you to handle these situations when they come up.
Understanding wills and trusts
Some people use the terms "will" and "trust" interchangeably, but they’re actually two different things.
Wills are documents that state what people want to happen to their property. Depending on the type of will, the will may go into effect when a person dies, or when they’re medically incapable of making decisions.
Trusts also state what property owners want to have happen with their possessions. However, a trust can go into effect while the property's owner is still alive, and able to make decisions.
Types of wills
There are two main types of wills:
- Living wills set out your medical wishes in case you become incapacitated.
- Last wills give orders for what happens to people's property after their death.
Last wills are usually typewritten, but can come in a variety of other formats. They can be handwritten, in a video, or given orally in front of witnesses. Keep in mind that not all states recognize all of these types of wills, though they can often still serve as confirmation of what’s set out in a legal document.
If you want to create a good will, start by researching estate laws in your state. There are several online will templates that can help you make sure you include all the necessary details in their proper format. It's still a good idea to have a lawyer review your will though, just to make sure you've covered everything.
After you write the document, have at least two witnesses sign it. Most states require these witnesses to be at least age 18.
Types of trusts
There are several varieties of trusts, but they all fall under one of two categories:
Living trusts take effect while a person is still alive. They can give the beneficiary control of assets immediately, or at a specified time. Living trusts may also be revocable, meaning that the property's owner can resume control of the property at any time.
Testamentary trusts are part of a will, and activate after a person's death.
Some types of trusts may provide certain tax benefits or other perks. For example, a credit shelter trust is often a good option for wealthy individuals. Normally, estates worth more than a certain amount are subject to taxation. However, a credit shelter trust can protect beneficiaries from having to pay the tax—even if the estate's value exceeds the cut-off.
Note that this isn't a comprehensive list of all your trust options. There are also qualified personal residence trusts, generation-skipping trusts, and life insurance trusts. These trusts are often complicated, and each come with their own set of rules and fine print.
Should you do it yourself?
There’s plenty of low-cost information and resources online to help you with will and estate planning. However, the question remains: Is it a good idea to take care of will and estate planning by yourself?
If you don’t have a lot of assets, or you don’t expect your heirs to disagree about what should happen to your property, you may be fine without a lawyer. But doing it yourself does still carry some risks.
State laws vary widely on what makes a legally acceptable will. Regulations regarding trusts are also complicated. An attorney can make sure you don’t miss any details that could affect property distribution.
It’s especially important to hire a lawyer for will and estate planning if any of the following situations applies to you:
- You own a business.
- You are recently divorced, or have been married more than once.
- You have minor children or no children at all.
- You want to leave some of your estate to charity.
Similarly, if someone you know recently passed away or became incapable of controlling their own assets, you should consider enlisting an attorney's help. An attorney can help you understand your family member's will and estate planning documents, and can explain your options if you disagree with something in the will.
All last wills must go through probate upon a person's passing. Probate is a court procedure that seeks to prove that a will is legally valid. However, trusts do not have to go through probate.
During probate, the will's executor—the person appointed to carry out the deceased's person's last wishes—has to submit the will and related documents to a court. The documents will show the value of the deceased person's property. In some cases, an appraisal will be necessary.
If someone challenges the will's validity, the executor and their attorney must attempt to defend the will.
The importance of will and estate planning
Proper planning ensures that survivors won’t have to make huge decisions during a time of emotional turmoil.
A lawyer can help you understand estate planning strategies, so you and your family members can rest easy knowing that your property will be handled according to your wishes.