Making preparations for the future transfer of your financial assets is a major part of estate planning. This involves the execution of legally binding documents with which you state your wishes.
One very commonly used vehicle of asset transfer in the field of estate planning is the last will or last will and testament. In this document you name your heirs, and you specify exactly what each of your heirs will be inheriting.
Everything does not happen on its own after you pass away. Someone must actually follow these instructions, pay final debts, prepare the property for distribution, and ultimately distribute inheritances.
This individual is the executor or executrix. The difference between an executor and an executrix is gender. An executor is a male who handles the affairs of an estate, and an executrix is a female. You name the executor or executrix when you create the last will.
If you are the parent of a dependent child or adult, you can nominate a guardian when you are creating your last will. This individual would be empowered to care for your dependent or dependents in the event of your death assuming the other parent had passed away as well.
The Process of Probate
If you arrange for the transfer of your property through the terms of a last will, the heirs to the estate don’t receive their inheritances until the estate has been probated.
The executor (known as the personal representative in the State of Florida) admits the will to probate. The court then supervises the administration of the estate. Interested parties who want to collect debts can come forward during probate seeking satisfaction. If someone wanted to contest the will, this individual could present an argument before the court.
During probate, the executor or executrix may have to see to it that property is appraised and liquidated so that it can be distributed among multiple heirs.
Avoiding Probate
Because of all the things that must take place during the process, probate can take a lot of time. Once again, the heirs don’t receive their inheritances until the estate has been probated.
There are also considerable probate expenses that accumulate during the process. These expenses can reduce the value of the estate.
Because of the above pitfalls, people often arrange for the transfer of their monetary assets outside of the process of probate. This can be done in a number of different ways.
Living Trusts
One very common way to avoid probate is through the creation of a revocable living trust. With a revocable living trust you as the grantor can serve the roles of trustee and beneficiary while you are living.
You can receive monetary distributions out of the trust, and you can manage the assets that have been conveyed into the trust. Because it is revocable, you can dissolve the trust if you want to and go forward with the money as you please.
The grantor may also change the terms of the trust. You can add or remove beneficiaries as you see fit.
Once you die, the trustee and beneficiary that you choose to assume these roles after your passing will do just that. The trustee will distribute monetary resources to the beneficiary or beneficiaries in accordance with your wishes as stated in the trust agreement.
Living Will
There is another type of will called a living will. A living will is an advance health care directive, and it has nothing to do with financial matters. Many people become unable to communicate health care decisions at the end of their lives. Doctors can sometimes keep people alive through the utilization of artificial means. You could use this type of will to state life support preferences.
Irrevocable Trusts
In addition to revocable living trusts, there are also trusts that can be revoked or dissolved. You could use this type of trust if you want to get assets out of your direct personal possession from a legal standpoint.
You could use an irrevocable trust to remove assets from your estate for estate tax purposes. An irrevocable Medicaid trust could be used to get assets out of your own name so that you can qualify for Medicaid to pay for long-term care.
There are other estate planning objectives that can be satisfied through the utilization of an irrevocable trust of some kind.
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