Are you familiar with the order of an estate distribution? Which entity and/or legal document takes precedence in an estate proceeding? Here is a generic overview of the hierarchy of estate distribution:
- Trusts – Revocable and Irrevocable trusts are the most common structures. They establish for asset protection before the individual passes by allowing the estate to forego probate proceedings. This can be a costly structure to setup and it is highly recommended that you seek the assistance of an estate attorney.
- Beneficiaries – You’ve been through the process of setting up your insurance and other financial accounts and having to name one or more beneficiaries. You may even list a primary beneficiary and a secondary beneficiary. Upon the death of an individual, whoever they name as a beneficiary has rights to the specified assets based on the allocation designated by the decedent. This process also allows the estate to forego probate proceedings.
- Last Will and Testament – This legal document specifies an individual’s final wishes upon their death, distribution of assets not covered in a trust or designated to a beneficiary, and also names the executor of the estate to carry out the terms of the will. People have left their wills as simple as splitting their remaining assets amongst their children to more complex matters as naming animals as heirs to their estate. Due to the legalities of this document and the requirement to authenticate signatures and witnesses, the estate must initiate probate proceedings in the individual’s jurisdiction of residence and the court’s must finalize the terms of the will based on all facts and evidence of the case. Depending on the complexity of the estate, probate proceedings can take several months to more than several years.
No matter what you determine is best for your situation, make a plan. Adjust it as necessary for changes in your life and tell a trusted advisor. Let your family grieve in peace without the uncertainty of handling your final affairs.