Estate planning can be a bit complicated for those who are not familiar with the process and procedures involve. To properly plan your estate, you need to have prior knowledge and understanding about it. This you can learn by doing a personal research on the topic.
Even after recognizing the importance of estate plan, it could still be quite difficult to commence the process but once this starting barrier is overcome, the preceding steps will follow.
Documents involved in an estate plan
Estate plan is a combination of different documents which makes provisions regarding the management of your estate in the case of incapacitation or death. These documents include last will and testament, trust, power of attorney, etc.
Last will and testament
A will is a legal document which contains details how your estate should be distributed among your heirs or other beneficiaries at the event of death.
Some importance of having a will
- Having a will gives you the opportunity to decide those to inherit your estate when you are gone. You get to choose who to get what. It helps to keep your estate from does that you don’t wish to have a share in your inheritance.
- Will makes it easier for your heirs to get access to your estate as everything would have been put in place by you.
- Will also presents you with the opportunity of donating your estate to charity. This can’t be possible when you do not have a will as family members won’t know of your desire to donate your estate to charity.
- In your will you can specify whom to look after your children whereas, in the absence of a will, this decision will be made by the court.
Types of Will
- Testamentary will
This is a type of will which you prepare and sign in front of witnesses. It is a written will and the most familiar will.
- Holographic will
This is also a type of will written and signed by the testator. But unlike the testamentary will the testator signs without a witness. These types of wills are used in emergency situations when there are no witnesses on ground.
- Oral will
This is a very poor type of will and it is the least recognized in court. In this type of will, the testator verbalizes his wishes in the presence of witnesses and this does not involve writing or documentation of any form.
- Mutual will
This type of will exist between married couples who are committed to each other. This will ensures that at the death of a spouse their estate goes to their children.
A trust is a relationship between a trustor and a trustee whereby the trustor gives legal right of ownership of his assets to the trustee for the benefit of the beneficiaries. A trustor can transfer assets to a beneficiary using a trust.
The difference between a will and a trust is that; a trust can transfer a assets to the beneficiary while the trustor is still alive but a will can only transfer an assets to the beneficiary only after the testator dies. There are different types of trust such as revocable trust, irrevocable trust, living trust, etc.
Trust has many benefits, some include;
- Avoidance of probate: Trust is a way by which you can avoid the probate process as this process can be time consuming and cost effective.
- Reducing tax: Trust is a way you can avoid or reduce the tax payable on your estate. For instance, your assets in an irrevocable trust will not attract state tax.
Possible errors in an estate plan
Estate planning is a very delicate process and care must be taken to avoid making mistakes as estate planning mistakes are very costly to fix. Most estate planning mistake cannot be fixed.
- Not naming a guardian for your minor: In the case of incapacitation and you are unable to care for your minors, the person whom you named in your estate plan will assume care for your minor. If you do not have a named guardian for your minor then the court will have to choose someone who will take care of your minor.
If you are new to estate planning you will need the assistance of an attorney who will walk you through all the processes involve in estate planning. Our attorneys are always available for consultation and hire.