An “estate” is not just a large plot of land owned by a wealthy family. Legally speaking, anything that you own is a part of your estate.
The steps you take to decide what happens to your property after death are called “estate planning.” There are many choices to make when creating this plan. Chief among them is deciding how you will pass your assets to your loved ones.
There are two major options for passing along your estate: a will and a trust. Your beneficiaries will receive their inheritance no matter which process you choose. The processes for each are, however, very different.
Here is how wills and trusts pass your property down to your friends and family.
A Will Goes Through Probate
The purpose of a will is to ultimately empty your estate, passing all your property to its intended recipients. Afterward, the estate dissolves, as it is no longer valid or needed.
Wills transfer property through a process called probate. This process officially passes ownership of all assets from one party to another. The person who handles probate is called the “executor” of the estate. You can name the executor in your will, or the court can appoint them.
Probate can take some time to complete, and it involves more than just moving property along. Executors must also pay off any of the deceased’s leftover debt.
A Trust Passes Along Property According to Rules
It’s helpful to think of a trust as a living financial entity. Any property that goes into the trust belongs to that trust. Transferring property is much easier, as it simply goes from one owner to another.
The trust generally creates rules, restrictions, and qualifications for passing along assets. For instance, it can hold property and give it to someone at a certain time. You could, for example, pass the car along to your child when they turn 16. Trusts can also put your recipients on an allowance, giving them inheritance over time rather than all at once.
Moreover, you can appoint a trustee to manage your assets in your absence. They can cut someone off who is squandering their money, or they could help that person learn how to properly manage their inheritance. A trustee could even create standards for an allowance, such as demanding their recipients maintain full-time work to receive their money.
Using Both a Will and a Trust
You are not restricted to using just one or the other. Your will can pass specific items along to friends and family, and your trust can help grow your estate while providing for your loved ones.
Make sure to work closely with your attorney when planning for your estate. Tell them exactly what you envision for your family and their future in your absence. They can help you decide how to use a will, a trust, or both to make those plans a reality.
Our firm is here to help guide you through the complexities of estate planning. For a free consultation, call our office today at (931) 361-4477. You may also schedule time with us online.