A lot of people are under the impression that estate planning revolves around the creation of a last will. In reality, there are a multitude of different legal devices in the estate planning toolkit. Plus, this comes as a surprise to many people, but there are multiple types of wills. We will look at four different wills in this blog post to provide some insight.
Of course, the most commonly utilized estate planning document is the last will or last will and testament. You can state your wishes regarding the way that you want your assets distributed after you pass away in a will. This can seem like a straightforward approach, but there is an administrative hurdle that can be somewhat problematic in some instances.
If you were to create a last will, you would name an executor to serve as the estate administrator. This individual would not be able to act independently without supervision. The will would be admitted to probate, and the court would act as a supervisory entity.
There is nothing inherently wrong with the probate process, and it serves a useful purpose. Creditors are allowed to come forward to seek satisfaction from the estate before the assets are distributed to the heirs. This is only fair, and if anyone wants to contest the validity of the will, they would have an opportunity to do so during the probate process.
The downside for the inheritors is the fact that it is a time-consuming process that will typically take about eight months to a year to run its course. No inheritances are distributed during this interim, and there are also some relatively significant expenses that can accumulate during probate.
In spite of the potential drawbacks, a last will can be the right choice for some people, though there are good reasons to choose an alternative like a revocable living trust, which we will look at in the next section.
Pour Over Wills
To understand the value of a pour over will, you have to digest some information about revocable living trusts. With this type of trust, you do not lose control of the assets in any way. You can act as the trustee and the beneficiary, and as the name of the device would indicate, you have the power of revocation.
Assets in a living trust can be distributed to the beneficiaries after the death of the trust creator or grantor outside of probate. This is one advantage, but there are others that we will explore in a future blog post.
You have to take the right steps to convey assets into the trust for estate planning purposes. However, many people that pass away will have assets in their possession that they never signed over to the trust. To account for this, you can include a pour over will, which will allow these personally held assets to be “poured over” into the trust after your passing.
The last two types of wills that we will look at here have nothing to do with financial matters. A living will is an advance health care directive that is used to state your final wishes regarding life-support. This is a personal decision, and you would be putting your family in a very difficult position if you do not execute a living will to make your own choices known.
Since biblical times, some people have been using ethical wills. They stem from the Judaic tradition, and they are used to record spiritual and moral values that surviving loved ones can draw from after the death of a beloved elder.
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