You've probably accomplished a lot in your life. Over the years you have worked, planned and saved. Maybe you have even made sacrifices to reach your current level of success. Chances are, you'll want to pass on your accrued assets rather than handing them over for court fees, taxes, or attorney fees.
Estate planning is the relatively simple process by which you prepare legal documents outlining your wishes for your estate upon your death. Planning for the end of your life can be difficult, but planning is necessary to protect your family and property.
What is your estate?
Your estate refers to your assets, the assets you own, including your total assets and liabilities. Your property includes your home, car, accounts (i.e. bank, retirement, and brokerage), jewelry, insurance policies, etc.
The language of estate planning
It's understandable that the idea of planning for your family after death can be a little scary. Knowing the terms used in estate planning will help you start to feel comfortable with the process.
Domain: refers to your property or things you own.
Ownership: Comprises two categories, real (like in real estate / your house (s)) and personal, which includes everything else like stocks, bank accounts, cars, jewelry, etc.
Intestate: is a pre or unplanned state. Intestate death means that you died without creating a will or trust to describe your desires to distribute your estate.
Trust: Eliminates many of the financial risks involved in planning to transfer your estate from you to your heirs upon your death. The risks include taxes, probate, lawyers, creditors, judgments, etc. A trust can manage your estate in the event of incapacity, reduce death rights, and ensure a smooth transfer of your property as you wish. Trusts can be revocable or irrevocable. Talk to your tax or legal advisor about the benefits of each.
Probate: The process by which your personal property is legally transferred to your heirs upon your death. The probate process also identifies the legitimate heirs and determines how your property will be divided between them. Probate can be quite expensive (up to 10% of your estate's equity), but the expense can be avoided through estate planning.
Will: A written legal document outlining your wishes for your real and personal property upon your death. You can also appoint a guardian for any minor child.
Beneficiaries: These are the people you assign to distribute your real and personal property upon your death.
Your will can be an important tool in your estate plan. The purpose of the estate plan is to allow you, rather than the probate court and lawyer, to maintain control over your assets. Planning gives you the ability to set clear directions and desires for your assets in the event of death or physical or mental disability.
Estate planning is a necessary and painless process. You will give yourself peace of mind and make it easier for your heirs to transfer property upon your death.