Estate planning involves complexities, and this is why it turns out to be overwhelming for a few people. But if you have a general idea of most of the terms and conditions of estate planning, things will be clear. It is one of the most important responsibilities of an individual.
If you are preparing to divide the estate among your heir, it’s high time. The earlier you do it, the better it is for you. We discuss some of the most common estate planning terms. So kindly read it so that you understand.
Terms You Should Know When Estate Planning
Estate planning is something that requires time and patience. The entire planning is implemented, taking all the beneficiaries into consultation. Estate planning unquestionably is such a territory of complexities.
This is why you might notice the internet is filled with searches related to succession planning. To make things simple, we discuss some of the estate planning terms.
A beneficiary is a crucial aspect of estate planning. It refers to the person or entity that receives the assets or property of the deceased person. It is important to identify a beneficiary to ensure that your property is distributed according to your wishes after your death. The beneficiary can be a spouse, child, relative, friend, or even a charity.
It is important to note that the beneficiary designation supersedes any will or other estate planning documents. This means that even if your will specifies a different distribution of your property, the beneficiary designation will take precedence.
Therefore, it is essential to review and update your beneficiary designations regularly, especially after major life events such as marriage, divorce, birth, or death.
Naming a beneficiary can also have tax implications, depending on the type of property and the beneficiary’s relationship to the deceased. Therefore, it is advisable to consult a legal or financial professional to ensure that your beneficiary designation aligns with your overall estate planning goals.
2. Durable Power Of Attorney
A power of attorney is the authority given to a person who can make decisions in your physical incapacity or absence with the division of property. There are two different types of POA, medical and financial POA.
With the medical POA, the person can make decisions on your health. Financial POA is taking the financial decisions on behalf of another persona.
3. Healthcare Directives
A healthcare directive or the advanced healthcare directive is a living will. Here you mention the medical care you want to receive when you turn old.
It includes the medications, the donation or organ, the appointment of people, and other things you wish to include in your will.
The benefit of the healthcare directive is that you ensure your wishes materialize and are respected when you will no longer be able to make medical decisions by yourself.
If you die without creating a will, it is termed intestate. It happens if a person dies too early. At that time, the court steps down to use the law of succession (of a state) to determine the property’s legal heir.
Dying in the estate leaves the family in zero control over the property. Moreover, the members of the family will be bound to the court on the decisions. Therefore you need an estate lawyer to complete the estate planning well in advance.
5. Joint Tenancy
Joint tenancy is one term used to describe a property’s co-owner. It simply denotes that two persons own one property. If one of them passes away, in that case, the entire property passes automatically to the survivor.
Generally, the husband and the wife generally bind and prepare this kind of will. It prevents safeguarding another person’s interest if one dies at any moment.
Probate is a process of validating the will and paying off the debts. It’s all about selling the remaining property owned by the individual and distributing the money to the debtors. The entire process takes place following the laws of the state. This happens when there is no will.
The probate process can be lengthy and expensive, often taking several months to a year or more to complete. The cost of probate can also be significant, with fees ranging from several thousand to tens of thousands of dollars, depending on the size and complexity of the estate.
One way to avoid probate is to establish trust. A trust can be used to hold assets during a person’s lifetime, and after their death, the assets can be distributed to beneficiaries without going through the probate process.
Overall, probate is an important process that ensures the deceased’s estate is distributed according to their wishes and state law. It is advisable to consult with a legal or financial professional to understand the probate process and determine the best course of action for your estate planning needs.
7. Trust And Trustee
The trust is a legal estate planning document that involves three parties- the trustor, the trustee, and the beneficiaries. Here the trustor gives the authority to the trustee to manage the assets on behalf of the beneficiaries.
There are different types of trusts; you have to select one based on your vision, wish, and the legacy that you want to leave after you. The trustee is the individual that holds the authority and the responsibilities of administering the term and conditions of the trust.
8. The Will
The will is a legal document of your property. It contains detailed directions on the persons among which you distribute the will after you pass away. The will protects the rights of the people (the heirs). To write a choice, you need the help of an attorney.
You also need to take the opinion of the other members and bring them confidence while preparing the will.
Bringing The Discussion To A Close
The terms that come under the discussions are generic ones, but they are important for you to learn.
They not only reduce your overwhelming state when it comes to property distribution but also help you be psychologically better prepared. At the same time, you talk to the attorney about preparing the will.