Estate planning can seem like a gloomy activity; however, it can be like planning for your children’s education or your retirement. It’s an opportunity to prepare for your family’s well-being if you are temporarily or permanently incapacitated.
Wills and trusts are estate planning tools that provide instructions for the distribution of your estate to your heirs and beneficiaries. They are legal documents that can be used separately or together; a will is used after you are deceased, while a trust can be used while you are alive or in conjunction with a will.
Wills
A will is a legal document expressing your intentions about how your estate should be handled in the event of your death. You can include instructions you would like honoured after your death, including guardianship for children under 18, the creation of a trust using specific assets, and funeral arrangements. These instructions will be carried out by your appointed executor, named in the will, and should be someone you trust to act on your behalf.
Probating a will
Your will must be filed and approved in probate court to be executed. Following its approval, debts and taxes are paid, and the remaining assets are distributed according to the terms outlined. When you probate your will, it becomes a public record – anyone can request a copy from the probate court. Probate can be a lengthy process, determined by the size of the estate, the number of creditors, and if the will is contested.
Intestate
When you die intestate or without a will, your estate is managed by intestacy laws and processed in probate court. This can be time-consuming and emotional for family members, who may incur additional expenses from taxes and professional fees. It also leaves the guardianship of minor children up to the court.
If you are in a common-law relationship, dying intestate can be problematic for your partner, leading to legal disputes with family members about the distribution of your estate.
Trusts
While a will can only be executed after death, a trust allows you to distribute or transfer assets to your beneficiaries while you are alive. A trust is a legal fiduciary agreement allowing you, the grantor, to delegate assets to be managed. According to the terms outlined in your trust document, these assets are managed by a third party, your trustee, for the best interest of your beneficiaries. A trust does not go through the probate process, so its contents are kept private. Many different subcategories of trusts can be created. The four main types are:
Living trusts
Living trusts are created while the grantor is still alive. A benefit to making a living trust is the transference of assets without going through the probate process. This can save time and legal fees, and reduce estate taxes for your beneficiaries.
Revocable trusts
Revocable trusts can be altered, amended, or terminated while the grantor is alive. Assets are transferred outside of probate, and because the grantor is alive, the assets remain part of their taxable estate.
Testamentary trusts
Testamentary trusts are created after a grantor’s death and according to the instructions of their will. They offer the grantor flexibility to alter the terms of the trust up until death.
Irrevocable trusts
If a grantor transfers assets to an irrevocable trust, they relinquish ownership and cannot alter the terms of the trust agreement. The assets and any income earned from irrevocable trusts will no longer be included as part of the grantor’s taxable estate.
Estate planning lawyers in Surrey
Consulting an estate planning lawyer ensures that your will and trust match your financial priorities and meet the required guidelines for execution. It can also reduce the emotional and financial burden on your family.
The wills and estate lawyers at Nirwan Law Corporation will guide you through the process of drafting your will or trust. Contact us at 604-372-0253 or fill out our contact form for a free consultation.