Are you thinking of making a will? Wondering what the difference is between a will and a living trust? Want someone to define probate for you?
The questions above are all good, and you’ll want to know the answers before you determine what to do about your estate. We asked the Federal Trade Commission to help define some of the terms you should know before deciding whether or not to make a will.
We Know: 5 Facts Before You Make a Will
5 Terms for Estate Planning
1. What is a Will?
A will is a legal document that dictates how to distribute your property after you die. Without a will, you die intestate, and the laws of your state determine what happens to your estate and to your minor children. The probate court has jurisdiction in this process.
2. What is a Living Will?
A living will is not a part of your will. It is a separate document that lets your family members know what type of care you do or don't want to receive should you become terminally ill or permanently unconscious. It becomes effective only when you cannot express your wishes yourself. If your state recognizes a power of attorney for health care, have one executed to authorize someone to act in accordance with your present intentions.
Discuss your wishes as reflected in your living will with family members, and be sure they have a signed copy.
3. What is Probate?
Probate is the legal process that usually involves filing a dead person’s will with the local probate court. The process can be costly and time-consuming. It usually involves:
4. What is a Trust?
A trust is a legal arrangement where a person (grantor) gives control of his or her property to a trust, which is then administered by a ‘trustee’ for the benefit of a ‘beneficiary’. The grantor, trustee and beneficiary can all be the same person. But the grantor also names a successor trustee and successor beneficiaries in case he or she dies or is incapacitated.
5. What’s a Living Trust?
A living trust, created while you’re alive, allows you to transfer ownership of your property and your assets into the trust. That way, you can control the distribution of your estate. You can name yourself, or another person or an institution to be the trustee. If you’re the trustee, then you name a successor trustee to distribute your assets after your death.
What’s the advantage of a living trust?
Properly done, a living trust can avoid the probate process described above. Badly drawn, or unfunded trusts, can cost you money.
NOTE: A living trust is not the same as a living will. A living will expresses your preferences about treatment if you’re seriously injured or terminally ill.