Estate Planning – From Beginning to End
Ok, well, this post will not go through everything in estate planning. However, we will discuss the beginnings (wills, trusts) to the end pieces (probate, executor of estate).
A last will and testament is a legal document that specifies who gets your stuff when you die. It can be a very broad definition, like it all goes to my wife. Or it could all my stuff goes to my children. Even something simple like this can be complex, as to your children could mean per stirpes or per capita. Per capita means that everyone gets an equal share. Per stirpes means that everyone gets an equal share at the level of their relation to you.
Let’s look at an example. Let’s assume that you had three children, one of whom died before you did. Let’s assume that child had three children themselves. If your stuff were given away per capita, then each of your five heirs (two children and three grandchildren) would get 20% each. However, if it is given away per stirpes, then your two surviving children would get 33% each and each grandchild would get 11% each.
Further, your will also sets forth who gets to take care of your children. If you are younger and die, then your will will tell everyone who you want to serve as conservator and guardian of your children. Conservator means that person that takes care of their money while guardian is the person that takes care of them physically. Many times these are the same person, but there are times when the duties are separated.
Revocable Trusts serve in lieu of a last will and testament. A trust avoids probate, which is why they are so popular. That way, people can avoid the time hassle and cost of a probate action through the use of their trust.
Trusts can have all of the effects of a last will and testament. They are also generally a bit more sophisticated as a document, which is why many times they are also used in estate tax situations.
In a probate matter, a person is named to watch over you stuff. That person is an executor if you have a will or an administrator if you were to die without a will. The executor of your estate would read over your will and admit it to the court. Then, the executor is tasked with making sure that the terms of your will are abided by. This means that the executor legally passes title of any property pursuant to the terms of the will as well as sets up any guardianship for any minor children.
Estate planning does not have to be difficult, although it can be. We’ll be discussing more in the next couple of posts.