Many people have heard of estate planning, but very few people understand what that means. Estate planning is the process of anticipating one’s passing and making arrangements for their assets and property.
Here are a few questions you may have about estate planning:
1. What is a will?
A will is the most basic document of your estate plan. Your will can include your last wishes, such as how assets are distributed. You can also name an executor of the estate to handle any unfinished matters. For example, your executor can collect life insurance, pay your final taxes and debts and distribute the remaining assets to your heirs.
2. What is a trust?
You can use a trust to put assets in the protection of a trustee who will distribute assets to beneficiaries. Unlike a will, however, a trust is not subject to probate, and they have unique features that can help avoid unnecessary taxation.
3. Is it better to have a will or trust?
Many people make a will and a trust. There could be legal issues if you have a trust without a will. But, a trust has several benefits that a will lacks. You can use it to control how assets are used after your death, including keeping it out of the hands of irresponsible heirs or their creditors.
4. Why would you update a will?
People frequently update their wills. Some people update their wills every few years to include new assets. But, others have updated their wills after getting married or divorced or having children or grandchildren.
5. What does a power of attorney do?
When making an estate plan, you have the option of naming a power of attorney. A power of attorney can help manage your medical and financial decisions on your behalf. Typically, a testator would use a power of attorney when the testator is incapacitated after developing a medical illness or suffering from an injury.
6. Should you seek legal help?
Estate planning is complicated without understanding your legal rights. You may need to reach out for legal help when drafting or altering your estate plan.