Many people underestimate the importance of proper estate planning. However, an estate plan can help provide a framework for your family after you are gone that will guide them through the process of handling your affairs according to your wishes. Without proper estate planning, it will be up to the courts to decide how your assets should be divided, and your estate may not go to your preferred heirs.
Contrary to popular belief, a will is not enough to keep your estate out of probate, as it will still have to go through probate in order to be verified. However, this may lead you to wonder what probate is, why it is a bad thing, and what your options are for sheltering your estate from probate. Keep reading as we continue to look at the most frequently asked questions we receive about estate planning.
What is Probate?
Of course, you may also be asking yourself what probate is. If a person dies without an estate plan, their assets have to go to probate court in order for their estate to be distributed. Without an estate plan to guide the division of the deceased individual's assets, it will be up to a judge to make these decisions in accordance with state law.
Not only does this process mean that your assets may not be distributed as you would have wished, but the probate process can be costly, reducing the inheritance your loved ones receive. Even if you have a will, your estate will have to go through probate so that a judge can verify your will and make sure that it is enforced.
Not only can probate be expensive, but it is also often a lengthy process that can put your loved ones through unnecessary stress during an already difficult time. This is why many people choose a living trust in addition to a will, as a properly prepared trust can help most of your estate to avoid the probate process, making things as easy as possible for your family.
What is a Living Trust?
Living trusts are an extremely common component of many people's estate plans, as they can help to keep your estate out of probate, reduce your estate's tax burden, and ensure that your assets are distributed properly. Yet, what exactly is a living trust?
A living trust is essentially a legal arrangement in which a trust's creator transfers their property and assets into a trust where it is then held for their benefit during their lifetime. Property that is transferred into a trust is technically owned by the trust, but the trust's creator can continue to benefit from the trust's assets during their lifetime as the primary trustee. Upon the trust creator's death, the assets within the trusts are then transferred to the trust's beneficiaries as designated by the creator prior to their death. The distribution of these assets is handled by a trustee chosen by the trust's creator before their death according to the guidelines outlined in the trust.
Since assets in a living trust are technically owned by the trust and not the creator, a trust does not have to go through the probate process. This means that your beneficiaries will have access to their inheritance quicker, and you will be assured that your assets go where you want them to after your death. Living trusts can even help to shield your estate from certain taxes as well, making them a popular option for people with large assets.
Estate planning can be an overwhelming prospect, but taking the time to do so will help ensure that your wishes are adhered to after you are gone. If you are looking to create an estate plan but are unsure where to start, feel free to contact us.