An estate is all the money and property owned by a person, especially at the time of death. Estates include furniture, jewelry, cars, bank accounts, businesses, properties, and real estate that you own.
Estate planning involves a process of determining where the above assets of an individual go when they die. It involves an individual’s family, entrusted friends, charitable organizations, and businesses. Estate planning also enables individuals to determine who will manage their assets during the end of their lifetime. Estate planning is used as a method by which loved ones can determine how and by whom personal health care decisions will be made for the estate owner, if the estate owner ever becomes unable to take care of him or herself. Wills and trusts are tools by which an estate owner can secure his/her estate after death. However, a complete estate plan includes many financial considerations in addition to wills and trusts.
- A will accomplishes two primary goals:
- A will is a written document that directs the disposition of a person’s property after death. Anyone who is at least 18 years old and of sound mind can make and sign his/her will. In Maryland, the will must be signed and the signature must be witnessed by two witness who also sign the will (notary not required).
- Wills typically include language about:
- A will is subject to probate, as probate is the process by which validity of a will is determined and the distribution of the will is supervised. Wills pass through probate court, which means a court essentially oversees the administration of the will. A will becomes a part of public record.
- A trust is an arrangement under which one person called a trustee holds property for another person called a beneficiary. You can be both the trustee and the beneficiary, through an arrangement called a living trust. A living trust is simply a trust you create while you are alive, rather than at death by the terms you created in a will.
- Trusts can be both revocable and irrevocable. A revocable trust is one that can be altered, amended, or revoked at any time by the creator. An irrevocable trust is one that cannot be changed by the creator.
- A trust instrument is one of the most flexible legal tools available. A trust can run a business, provide for minors, pay medical bills, create a scholarship fund, provide for retirement/education/marriage/divorce, and hold real estate or any other type of property.
- If you hold your property in a living trust, your survivors may not have to go through probate court, a time-consuming and expensive process.
While there are many differences between Wills and Trusts, the chart below provides a baseline comparison: