Proper estate planning is one of the most important things a person can do to provide financial security for their family and loved ones. When thinking of estate planning, there are several vital aspects that must be considered and planned for in order for a seamless transition of property and assets to occur. Without the proper instrument to achieve a smooth transfer of the estate, there is a possibility that property and assets may wind up being dispersed in a manner that was not intended by the original estate holder. With this in mind, it is easy to understand how important it is to plan ahead to ensure that property and assets are distributed according to the wishes of the estate holder.
The question of how to best go about achieving a proper plan to divide one’s estate can only be answered by the individual according to their unique situation and what they wish to achieve with their estate. There are different instruments that can be utilized to plan for the division of an estate:
A durable power of attorney is an effective legal tool that can be used to help a person take care of the details of an estate plan if they are not fully capable of executing it on their own. There are substantial differences between a last will and a living trust, and each has unique benefits and drawbacks that must be understood in order to make an informed decision as to which will fit best according to a particular situation.
A last will and testament is a legal document that basically spells out the final wishes of an individual as to who will inherit their property and assets upon their death. It also can appoint a legal guardian to act as custodian for any minor children who will be left parentless by the death of the individual. The last will names a person to act as an executor of the estate responsible for carrying out the individual’s wishes and disbursing the individual’s property and assets accordingly.
A last will can be used to name multiple beneficiaries to an individual’s estate as well as specifically leave certain individuals out of that inheritance. Last wills become effective only upon the death of the individual but they do not always prevent probate hearings. Likewise, a durable power of attorney is effective in assisting an individual plan their estate as long as the person is alive.
A living trust is different than a last will in that it is set up prior to the death of the individual and becomes active as soon as it is signed. Any assets or property can be placed into the trust and the grantor maintains complete control over the property and assets allocated to the trust as long as they live. Upon their death, an appointed trustee becomes steward of the trust and administers it according to the wishes of the grantor.
This person becomes known as the trustee and is responsible for making sure the directions of the trust are adhered to. Living trusts are unique in that once the beneficiary or beneficiaries of the trust are named, they can begin receiving benefits of the trust while the grantor is still alive. The living trust effectively eliminates probate concerns that can arise after the death of the grantor.
While each of these methods can be an effective means of planning an individual’s estate, it is apparent that both have drawbacks.
Perhaps the best solution for complete estate planning and financial security, especially in the case of larger estates with multiple beneficiaries, is to utilize a last will, a living trust, and a durable power of attorney to ensure all areas are covered. An individual or a couple can place all of their property and assets into a living trust and still maintain control over them while their beneficiaries enjoy the benefits of the trust immediately or are assured of their inheritance after the death of grantors.
While real estate may be transferred to a beneficiary under a last will, it is often preferable to use a living trust. Using a last will can mean that the property becomes tied up in the probate process.
A last will can be used to name guardians of minor children or dictate one-time allocation of property or assets to individuals not specifically named as beneficiaries of the trust, such as other family members or specific charities. A durable power of attorney can designate a trusted individual to ensure all plans are carried out. By combining these legal documents, it assures the highest level of legal and financial protection for an individual’s estate.
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