A few thousand years ago, life was, in some ways, a lot simpler: you were born, you lived a (hopefully) long life, and then you died. There was no legal stuff to deal with, no paperwork to sign off, nothing to worry about.
But that was before money and material goods were invented – and it’s safe to say that we couldn’t live without those things nowadays.
Though it can be confusing to plan where your money and assets will go after your death, it’s well worth doing sooner rather than later.
Shadi Shaffer, a lawyer, noticed that many of her clients would often mix up estate plans, trusts and wills.
She made a video to simply explain the terms and their differences, which is well worth checking out if you’re keen to get your end-of-life planning sorted soon.
She’s simply clarifying the terminology, speaking in plain English as much as possible, so this is a great place to start if you’re completely clueless about this stuff.
1. Estate plan
An estate plan is a series of legal documents that creates your estate plan, or your family’s estate plan. Every family has different circumstances and needs. An attorney will assess the situation and, based on what your family needs, they create a series of legal documents that make up your estate plan.
An estate plan generally has a trust and a will – discussed below – included. For example, a standard estate plan would have a trust, a will, power of attorney for finances, health care directives, and other important legal documents that help manage your estate when you’ve passed on.
Sometimes people assume that if they have a will, they don’t need a trust – but that isn’t necessarily true. When you have a trust, you generally also have a will. But if you have a will, you might not always need a trust.
It sounds a little confusing, but Shadi’s explanation makes it easy to understand.
You may need a trust along with a will if you have real property in the state of California or if you have a business with assets over $150,000. In those cases, you will also need a trust, as a will alone doesn’t protect you from probate court in this instance. If you only had a will, you’d have to go through probate court to get access to the monies.
A will can also transfer estate to heirs, but your family can’t skip probate court with this option. To quickly explain probate in more detail, all wills have to go through this legal process before family members can receive money or assets from that will. This process can be quite lengthy, especially if anyone in the family contests the will.
As with a trust, a will becomes active after a person’s death. It’s a written document that expresses your wishes, including bequeathing your assets to friends, children, and grandchildren.
That’s it: a basic explanation of estate plans, trusts and wills.
If you’re ready to learn about these terms in more detail, Investopedia has a slightly more in-depth article that’s worth a read.
Should you still be unsure, it’s worth getting in touch with a legal expert.
They can help you to quickly and simply get everything in order without the hassle of figuring it all out for yourself.
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