What Is Estate Planning? 

Estate Planning is the process of determining the distribution of your assets upon your death. But proper estate planning also covers the management of your personal affairs in the event of your incapacitation. 

Only a few people think about estate planning because many believe that it is something that only the rich and affluent have to do. Of course, if people don’t do much in terms of savings, investment, and insurance, estate planning will not be on their priority list. So either they believe that they don’t have an estate, or that whatever they have is not enough to warrant any planning. 

But in fact, everyone has an estate. Your estate is everything you own minus your debt, such as your house, car, money in the bank, family heirlooms, and so on. Even if you have only a car or some jewelry, it is important to state who you want to get them when you become an angel because while only one person would benefit from taking the car, multiple people could benefit if you state that the car should be sold and the proceeds shared among the people you desire. 

Imagine you worked hard for 30 to 40 years and built up an estate that you want to pass on to your loved ones or to a charity, but it ends up with someone else or in the government’s purse due to your lack of planning. Not cool! 

This is why estate planning is very important! And this can be done using a Will or a Trust. A Will or Trust will help you to organize how you want your estate to be distributed in the event of your incapacitation, or when you pass away. 

What Is A Will? 

A Will, also referred to as your last testament, is a legal document that allows you to distribute your property to your loved ones, a charity, or a research organization. It takes effect after you die and allows you to assign specific items from your estate to one person and other items to other people or an organization from the grave. You can also name an Executor, who is the person who will carry out your wishes. 

Making a Will also gives you the opportunity to pick a guardian for your young or disabled children. The guardian will be responsible for their welfare. If you don’t have a will, the government will use their standard will to decide how to distribute your estate, and chances are, you will not like what they do. 

What Is A Trust?

A trust is a fiduciary relationship in which one party, known as a trustor, gives another party, known as the trustee, the right to hold title to properties or assets for the benefit of a third party, called the beneficiary. A Trust is established to provide legal protection for the trustor’s assets, to ensure that they are distributed according to the wishes of the trustor. Having a trust also saves time, reduces the amount of paperwork involved and, in some cases, it avoids or reduces inheritance or estate taxes. 

Unlike a will that only takes effect after you die, you can have a Living Trust that benefits you while you’re still alive. Living Trusts are generally revocable, meaning you can always make changes to them. With a living Trust, all your assets like your home, bank account, and investments are put into the trust, which is administered for your benefit during your lifetime. When you die, the Trust is transferred to your beneficiary. 

Most people name themselves as the trustee in charge of managing the assets in the Trust. Thus, you can have control over your Trust. You can also name a successor trustee in case you are unable to manage the Trust. So put simply, a Trust is like you creating a corporation where you put all your assets in it, and you run it or have someone run it for you. 

For people with limited assets, a simple Will can cost anywhere from $50 to $200. However, it will cost people with a significant amount of assets much more for a Will. A Living Trust may cost more to prepare, fund, or manage than a will. But having one or the other helps to avoid probate costs for all the assets in your estate. Thus, you should have a will or a Living Trust to take care of your family, or else your loved ones will be at the government’s mercy.  

Proper estate planning with the help of professionals such as a financial advisor, a lawyer, and an accountant is very important for you to leave a legacy, reduce estate tax, and preserve your estate for the reasons that, and the people who, you worked all your life for.