Understanding the legal jargon associated with trusts and wills can be a daunting task. However, knowing these terms is crucial when planning your estate. This blog aims to simplify some of the most common terms you might come across during this process.
A will is a legal document that sets forth your wishes regarding the distribution of your property and the care of any minor children after your death. It’s a fundamental component of estate planning.
A trust is a fiduciary arrangement that allows a third party, known as a trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries.
A beneficiary is an individual or entity (like a charity) that is designated to receive the benefits from an estate, trust, retirement account, or life insurance policy.
Your estate consists of everything you own—real estate, bank accounts, investments, life insurance, furniture, personal possessions. Your will or trust details who will inherit your estate after your death.
The executor is the person named in your will who is responsible for ensuring your last wishes are carried out. They pay all debts and taxes due from your estate and distribute the remainder according to your instructions.
Probate is the formal legal process of validating a will and distributing assets after someone dies. This process includes paying debts and taxes, and transferring ownership of assets to the heirs and beneficiaries.
If a person dies without a valid will, they have died “intestate”. In such cases, state law will determine how and to whom the person’s assets will be distributed.
Power of Attorney
A power of attorney is a legal document giving one person (the agent or attorney-in-fact) the power to act for another person (the principal). The agent can have broad legal authority or limited authority to make decisions about the principal’s property, finances, or medical care.
Guardianship is a legal process used to protect individuals who are unable to care for their own well-being due to infancy, incapacity, or disability. A court will appoint a guardian to care for the individual, making sure their legal rights are upheld and their well-being is looked after.
A living will is a written, legal document that spells out medical treatments you would and would not want to be used to keep you alive. This document speaks for you when you’re not able to speak for yourself.
Understanding these terms can help take some of the mystery out of estate planning. However, it’s essential to consult with an experienced attorney or financial advisor to ensure your assets are protected and your wishes are carried out. Estate planning is not a one-size-fits-all process; each person’s situation is unique, and what works well for someone else may not work as well for you.
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