The Gift tax, Estate tax, and the Transfer tax are the main methods by which the government attempts to get its share of your final estate. Wills are documents which define the administration and distribution of an estate when the owner dies. Beneficiaries and alternate beneficiaries are defined in a will and it effects all assets that are not automatically passed on through operation of law or contract. Wills are simpler and less expensive to prepare than a revocable living trust. Living wills are another type of will, in which the healthcare provisions of the trustor are defined in the event that he or she may not be able to express these preferences due to incapacity.
Trusts are a useful instrument in estate planning for many reasons.
A trust allows assets and properties to pass to the trustee or trustees directly without first going through probate. It protects the funds from any creditors who may wish to collect from the trustee, as well as providing a way for an estate to pass to beneficiaries without being heavily taxed. An important initial step when preparing to plan an estate is to be aware of the legal forms of property transference upon death. These assets include life estates, joint tenancy, community property, and some accounts with a designated beneficiary. This form of transfer, like operation of law, passes to the defined party without being subject to probate and wills.