It's true what they say: you can't take it with you. So, what happens to all of your personal possessions and properties when you pass? It's important to take time while you are still alive to start estate planning.
What Is An Estate?
An estate is the culmination of all possessions owned by someone in their lifetime. This can include real estate, personal property, stocks, debts, and more. Before you die, it's crucial to put your estate into a trust or create a will; this will make sure your last wishes are legally binding. If you do not put your estate plan into a trust, the government will decide how your possessions will be divided once you pass. If you die without a will in California, your estate is divided among your spouse and children if you have them.
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Making A Will
A last will and testament is a legal document detailing someone's last wishes on how their estate will be distributed and handled once they are gone. It is a legally binding document detailing where you want your estate to go and be distributed. It can also outline who will be the legal guardian of your children if you pass while they are still minors.
Setting Up Trusts
Even with a will, you can set up trusts, which is another way to divide your estate. Trusts are helpful because if you create a revocable trust, you are allowed to edit it anytime during your life. Trusts also help create stricter rules, so they are harder to dispute than a will, which helps keep them out of probate court.
What Is Probate?
Probate is the process a will enters after the trustor, writer of the will, has passed. It's a process in which the validation of the will is recorded and authenticated. On average, probate can cost anywhere from 3% to 7% of the total estate's value. Creating a trust is a way a lot of people avoid going to the probate court because a trust is harder to contest and edit than just a stand-alone will.
Making Charitable Donations
Some people set up charitable trusts or posthumous (occurring after death) donations after they pass to help lower estate taxes. If you create a charitable trust, you can still leave some of your money, assets, and properties to your surviving family members.
When writing a will or creating a trust, it's important to assign roles and responsibilities clearly. Some of the most important roles in estate planning are the executors and the beneficiaries. The executors are responsible for overseeing the will and ensuring the wishes listed are fulfilled after the trustor dies. Beneficiaries are the people who will benefit from the will and trusts and receive parts of the estate after.
Having a laid-out plan for your funeral can help your family after you pass. When planning a funeral, it's important to consider the location of the funeral, how you would like to be laid to rest, and finding a funeral home to take care of your body. It's a cumbersome and emotional process but a vital part of planning your estate and writing your will. On average, a funeral in 2021 in California costs $11,000. It can be helpful to lessen the financial burden on your loved ones if you leave money in your will or trust designated for your funeral.
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