Updated August 3, 2016 . AmFam Team
You’ve probably heard of the term “estate planning,” but maybe you’re wondering what it is, and why it could be important to you.
No worries — we’ve got you covered. Here’s a quick and easy overview of estate planning basics, and why it’s a good idea to create an estate plan.
What’s an estate? To some, the word “estate” may conjure images of palatial mansions, ornate topiary gardens, and perhaps even fox hunting, if you’ve got a vivid imagination. Actually, it’s simpler than that. An estate is simply everything you own — your car, possessions, property, savings and checking accounts, investments and more. Virtually everyone has an estate.
Why do you need an estate plan? Having an estate plan gives you control over who will get your stuff, and how they’ll get it, after you’re gone. If you don’t have an estate plan in place, the laws in your state will designate which family members will inherit your estate, which may not necessarily be according to your wishes. Estate plans also allow you to choose a guardian for your children, in case the unexpected were to occur. Without an estate plan, a court would make that decision.
Wills vs. Trusts. An estate plan can take the form of a will, a trust or both. A will indicates how and when your estate will be distributed, and to whom. Wills also allow you to name an “executor” — that’s the person who will manage the distribution of your assets. Additionally, wills involve naming a guardian for your children. Trusts also allow you to designate how, when and to whom your estate will be distributed, but it’s done under a special arrangement in which a “trustee” is given responsibility for overseeing the distribution of the estate to “beneficiaries,” typically the spouse and children. Trusts offer a big advantage: they can save you time and money by helping you avoid probate — when courts handle the process of finalizing and distributing your estate.
No matter how wealthy you are or how old you might be, setting up an estate plan is a smart way to make sure what you leave behind goes to the right people at the right time. It’s about managing your legacy, so the people you love can benefit the most from it.
This article is for informational purposes only and based on information that is widely available. This information does not, and is not intended to, constitute legal or financial advice. You should contact a professional for advice specific to your situation.