Although no one likes to think about dying, there are good reasons to prepare for this inevitable event by setting up a plan to distribute one’s estate after death.
A person’s estate consists of all his or her property and possessions, and includes bank accounts, real estate, furniture, automobiles, stocks, bonds, life insurance policies, retirement funds, pensions, and death benefits. If a person plans well, his or her estate often can be passed on after death quickly, easily, and subject to fewer taxes.
A will is the most common document used to specify how an estate should be handled after death. Anyone designated to receive property under a will (or trust) is called a beneficiary. A will can be simple or elaborate, depending upon the size of the estate and the wishes of the person who makes it, called the testator. Many types of post-death instructions can be described in a will. A will can describe who should receive specific items of furniture, art work, or jewelry. A will can name a guardian who will take care of minor children should there be no surviving parent. A will can disinherit a child if the testator does not want the child to receive any part of the estate. The options for what a person can do with a will are varied but limited.
A trust is another frequently used estate planning device that manages the distribution of a person’s estate.