It is never too early for adults to think about estate planning. Estate planning is an important part of money management.
While it is easy to think of estate planning as just a way to dictate how your assets are allocated after your death, estate planning also can protect people and their money should accidents or injury make them incapable of managing their finances on their own.
Some familiar terms may come up when people begin planning how they hope to transfer their assets.
Two more common terms are wills and trusts. Understanding the distinctions between the two can help people as they begin estate planning.
What is a will?
The online financial resource Investopedia notes that wills are legally enforceable documents that dictate how people want their affairs handled and assets allocated in the wake of their deaths.
Wills should include a host of information, including who a person wants to assume guardianship of their minor-aged children should they pass away.
This is especially important information to include in a will, as surviving relatives may have to go to court to contest guardianship if parents do not dictate who they want to serve as guardians in their wills.
What is a trust?
A trust is a relationship in which another party is given authority to handle a person’s assets for the benefit of that person’s beneficiaries.
When making a trust, a person will need to designate someone as a trustee, who will be tasked with distributing assets in accordance to the terms dictated in the trust.
There are many types of trusts, and working with an attorney who specializes in estate planning can help men and women determine which type of trust, if any, is best for them.
Is it better to have a will or a trust?
Both wills and trusts can be useful when estate planning. In fact, wills are often used to establish trusts, and many people have both a will and a trust.
Estate planning is an important part of managing one’s finances.
A qualified attorney who specializes in estate planning can help people write their wills and, if necessary, establish trusts that can help surviving loved ones in the wake of their death.