You may be ready to make an estate plan. An estate plan would allow you to anticipate how your assets will be handled after your passing.
There’s a lot to learn about estate planning before you begin. Here’s what you should know:
Heirs and beneficiaries are not the same
The terms “heir” and “beneficiary” are often used interchangeably to mean people who benefit from the deceased’s estate. However, these two terms have distinct differences.
An heir is someone who benefits from an estate when there is no valid will. Heirs often follow the order of spouse, children, parents, siblings and then extended family.
A beneficiary is a person chosen by the testator to benefit from the estate. A beneficiary can be anyone, including a spouse, child, friend or colleague.
You can update your estate plan
An estate plan can become outdated. While it may not mean an estate plan can’t be used, it does mean there are assets and beneficiaries that may be excluded from the plans.
Many people update their estate plans every few years to include new assets and beneficiaries. People may also consider changing their estate plans after big life events, such as marriage or divorce.
Heirs can be removed from wills
Many people have falling-outs with friends and family members who are included in a will. A testator may consider removing their beneficiary. However, testators should be aware of the proper way to veto and dispose of an old will. If an old will isn’t properly disposed of, it could be used to benefit the former beneficiary.
Trusts have advantages over wills
After the testator passes away, their will could be taxed, their beneficiaries may be subjected to probate and their estate plan could be challenged. These difficulties may be avoided with a trust. A trust allows a grantor to put their assets in the possession of a trustee until they are instructed to distribute them to beneficiaries.
Before you make an estate plan, it can help to learn about all of your legal options.