What is an inheritance plan
A will is an important legal document that is the first building block of a good real estate plan. After determining that you need an estate plan, your estate planning plan will recommend either a will-based estate plan or a trust-based estate plan. Your last will and will will take on significantly different roles depending on the type of plan you choose.
Will-based estate plan
With a will-based estate plan, your last will and testament will provide all the essential details about who will inherit your property, when and how they will inherit it, and who is on charge of handling your final affairs.
With a will-based estate plan, your last will and testament will cover four important points:
- Who will act as the Personal Representative / Executor, ie the person who will be in charge of handling your final affairs and ensuring that your beneficiaries will receive their inheritance;
- What powers does your personal representative / executor have?
- Who will inherit your property; and
- How and when your property will ultimately be transferred to your beneficiaries.
If you have underage children, your last will and testament will also cover a fifth important point: who will serve as custodians for your underage children until they grow up.
Escrow-based estate plan
With a trust-based estate plan, your Revocable Living Trust will cover the four key points above, but the person in charge of handling your final affairs after death will be called your managing authority. or successor trustee in place of your personal representative or executor.
However, even with a revocable living trust, you still need a last will and testament. This is because you must invest your assets in your trust before you die, so your trust agreement can determine what happens to the trustworthy property after you die.
But if you fail to invest even an asset in your trust, then your last will and testament will be necessary to "catch" the uncapitalized property and transfer it to your trust after your death. In this case, the last will and testament will simply act as a "pour over the will" meaning that it ensures that the unfunded assets are placed in your trust after death through the inheritance process.
A pour over just needs to cover two key points:
- Who is responsible for your assets that are not invested in your trust as a personal representative / executor; and
- What power does your personal representative / executor have?
If you have underage children, your pour over will will also cover a third important point: who will serve as custodians for your underage children until they grow up.
Where do the assets that were not invested in your Revocable Living Trust go once they go through the probate process? This is determined by the rules of your Revocable Living Trust.
What happens without a last will and testament?
What if you fail to make a last will and will before you die? Then the state in which you live at the time of your death, as well as any other state in which you own real estate at the time of your death, will provide a last will and will for you in accordance with the state's intestacy laws.
These laws vary widely from state to state and can lead different people to inherit your property if you own real estate in more than one state.
The only way to ensure that your property benefits the beneficiaries you choose, as opposed to the beneficiaries that your state of residence or the state where you own real estate decides, is with a valid will.
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