Intro to Estate Planning - Evaluating Your Assets

To many people death is an uncomfortable subject and few like to contemplate their own death. As hard as the topic can be, it is inevitable that everyone one day must pass. As an individual grows older and accumulates assets, it becomes more and more important to articulate how his possessions and funds will be passed on and to whom. It's never too soon to set up a plan for your possessions, and it's always a good idea to have a basic outline for where your money will go. The first steps of estate planning involve taking a look at your assets and determining who should receive them when you die.

By definition, estate planning involves preparing legal documentation that states who should receive your assets after your death. It can also address issues concerning who has authority to make decisions for you during severe illness and arrangements for your funeral and burial. If a death occurs and there is no will or trust established, each state has a standard procedure for dividing the assets of the deceased. Decisions about these situations are made by a probate court, but most prefer to create their own will or living trust and choose how their possessions are passed to their loved ones.

The most basic form of estate planning is a will. This legal document defines who should receive which of your assets upon your death, but it does not dictate when. A probate court reviews the instructions left in the will and evaluates the deceased has left behind. Any assets not specified in the will are distributed as the court sees fit. The inheritances are distributed to the friends and family specified once the court fully reviewed the case. This process can take a few months, depending on the complexity of the case.

Another option that many choose is a inter vivos trust, or living trust. A living trust names beneficiaries much like a will does, but inheritance is passed without review of a probate court. The grantor, or creator of the trust, can also establish when each beneficiary receives his assets and can name a trustee to oversee the trust. Often families choose this type of agreement to avoid waiting for a probate case to settle. Court fees are also avoided, but more must be paid upfront when the trust is created. Beneficiaries are not exempt from inheritance taxes, so trusts often sacrifice a bit of money in favor of privacy and control.

Assets can also be passed along through life insurance policies and retirement funds. Typically beneficiaries are established when the policy is created. These transactions are handled outside of the probate courts by the institution in charge of the account. An important part of estate planning includes reviewing these policies and evaluating how they will affect your beneficiaries.

Whatever arrangements you choose to make, it is important to invest some time and thought into estate planning. A little foresight into your situation can save your family unnecessary hardship and ensure that your assets are distributed, as you desire.