If you are in the process of planning your final wishes, you probably have heard the term “estate” thrown around quite a bit. It is vital for everyone taking care of their will to understand what an estate is and what it means to do estate planning. This simple guide will explain the term, and help you understand what your estate planning options are.
What Is an Estate?
The concept of an estate is actually quite simple. An estate is the culmination of everything an individual owns. It is essentially, all of your possessions and money. Your estate also includes things such as property, homes, vehicles, investments, stocks, and businesses. If you own something, then it is part of your estate.
Most of the time, the concept of an estate comes up in the context of estate planning. This is essentially the process of deciding what will happen to all your possessions after you die. You need to take the time to make these decisions. If you do not have an official statement of what you would like to do with your estate after your passing, the court will have to make some decisions on your behalf. The first decision to be made is to designate someone to be the executor of your estate. If you plan your own estate, then you can choose who will be the executor yourself.
What Are Your Estate Options?
There are typically two options everyone has to plan their estate:
- A will
- A trust
A will is more traditional, and the most popular option by far. A will is an official legal document that describes what should happen to your estate, as well as who should gain guardianship of any minor children.
A trust is an agreement to transfer your possessions to a third party, and then the possessions will be transferred to the individual you specify when a condition is met. For estate planning, this condition will be your death, but a trust can be set up for any number of different purposes.
A trust is less secure than a will because you are trusting a private individual with your estate, rather than the courts. However, a trust does allow you to make certain specifications that are impossible with a will. Each option offers unique benefits, so it is up to you to decide which is better, or if having both would be best.
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