Managing your estate is important for two reasons: the first, establishing your financial situation and second, is planning out what happens to your estate when you pass. Estates include everything your family needs to divide your assets accordingly. Ensuring that your estate plan is clear and detailed can prevent turmoil among your family members over the assets you left behind. It is important to manage your estate so that they are given to the rightful heirs you intended.
What is it?
In laymen’s terms your estate is all your assets which leads to estate management. Estate management is the breakdown of how your assets and designating them to specific heirs. Estate management can be in the form of a trust or a will; while they are similar is purpose, they are both set up very differently and have multiple styles according to what the individual wants.
In order to set up a trust or a will, you should meet with a lawyer and a financial planner. They will walk you through which entity would be best for you, setting it up, how to manage it, and strategies to grow your assets for your heirs. If you do not meet with a lawyer and financial planner, your trust or will could be misinterpreted or put up for legal viewing. If not done correctly, the state decides how your assets will be distributed and the state’s decision could potentially go against your intended wishes.
No matter which entity you choose, you will always need a will. A will spells out exactly where you want your assets to go when you pass. This is essential if you want to have control over where your assets go. A lawyer will assist you in making sure the wording is exactly as you intended it to be and ensuring that all the right steps have been taken for your estate.
One thing to be weary of with a will is it has to go through probate court. This is a legal process where the court goes through the will, determines the value of the assets, allocates money for unpaid taxes, and then distributes the remaining amount to the listed beneficiaries. This process can be costly and can take years to settle the agreement.
The second thing to be weary of when using just a will is probate court is on public record. Because it is a court case, anyone has the ability to look up any part of the case including the values of each asset, who they went to, and how probate was settled.
When should I set up an estate plan?
Ideally, your estate plan should be established when you start generating assets just in case something happens to you, your assets are secure. Most people start thinking about estate plans when they have kids and are starting to get older. It is important to set it up right away and you can always change it as your life evolves.
Another reason your estate should be set up as soon as possible is so your family knows what you want if you were to become incapacitated. Your estate addresses all your healthcare wishes, how to transfer the trust early, and ways to avoid probate if you do not have a trust established.
We briefly discussed wills so now we will go discuss trusts. A trust is a legal entity that transfers all of your assets to beneficiaries. Sounds familiar right? The difference between a trust and a will is that a trust avoids probate therefore it is not released to the public, it is an effective management style for your assets, trusts provide a measure of control even after the individual passes away, and it is very difficult to contest. A trust is more solid and easier entity for all involved. It is much quicker and cheaper since it does not involve probate. Also, a trust is private so no one else will know the values of the assets or who they are going to other than the beneficiaries, the lawyer involved, and the financial planner.
Choosing the right option
Choosing the right estate management entity takes time and research. This is why it is advised that you meet with a lawyer and financial planner when setting it up. A financial planner and lawyer will also help you determine the value of each asset and can help your beneficiaries determine the growth of the assets when it is given to them. Another great reason why discussing these entities with a lawyer and financial planner is they will be familiar with your assets and can help the beneficiaries with the transfer process. Having those expert resources is a great way to securing your estate management.