Probate. Utter the word to almost anyone and be prepared for exclamations of hostility and disgust. But, what is probate? Can it — and should it — be avoided?

A trust is a legal arrangement in which one person agrees to hold and manage the property of another person for the benefit of someone else. With a trust, three parties are involved: the one who transfers the property to the trust (the grantor), the one who has the responsibility for managing the property (the trustee), and the one for whose benefit the trust is established (the beneficiary).

A power of appointment is created when you give a person the right to determine who will receive specified property that you own. You can create such a power that is effective while you are alive, or one that only arises by way of your will (called a testamentary power). While a power of appointment can be created by a will, as a practical matter, it's usually granted to the trustee or beneficiary of a trust.

Your will can transfer property to others in shared ownership (either in a tenancy in common, or a joint tenancy). You might want to consider such a bequest if you have a property that cannot be easily divided and there are two or more people you would want to benefit equally. Keep in mind that such an arrangement should only be considered if you're reasonably sure that these people can use and enjoy the property in harmony. If this is the case, shared ownership may be OK, but a tenancy in common might be more fair to the heirs of the beneficiaries, since the survivorship feature of a joint tenancy means that only the beneficiaries of the surviving tenant will ultimately get the property (unless the joint tenants agree to a partition of the property during their lifetimes).

When you create a will that substantially restricts your heirs' ability to use the property (or to pass it along to their heirs at death), two conflicting legal principles are involved:

If you die without a will, anyone who receives your property (other than minors) will generally receive it outright, with no restrictions or conditions attached. This may not be what you want. For example, you may want to let a close friend use a certain property for the remainder of his or her lifetime, but at this person's death, you want the property to come back to your heirs (rather than your friend's). Can you do this? The answer is "yes." You can do this, and other things that will restrict or condition the recipient's use or ownership of the property. Some of the more common methods of doing so are listed below. As will be noted in our discussions that follow, you will need to be particularly careful when restricting property use by will, and you are well advised to seek the advice of an attorney who regularly deals with wills and trusts.

The right to use property that you transfer by your will can be split among different people, based on the passage of time. One person (or group of people) can be given the right to use the property currently, while another person (or group of people) can be given the right to use the property at some future date. A person having the current use is said to have a "present" interest, while the second person is said to have a "future interest."

If you don't have a will, your home state will distribute your wealth equally to your closest relatives, even if one is the richest person in the world and another is a pauper. A will gives you the ability to consider how much someone needs your property and/or how generous you want to be to a specific person.

A will gives you the power to clearly direct the distribution of specific items of your property to the specific persons or organizations that you choose. If you don't have a will, each person who falls within the state law classification that applies to intestate distributions has equal rights to receive your property.

If you don't care what happens to your property at death, and you don't have minor children on the scene, you probably don't need a will. This, however, is not the usual case. Most of us have people or organizations that we would like to benefit. But, unless these objects of your bounty are the same ones that would receive the property under your state's intestacy rules, they will be out of luck if you don't provide for them by will.

Each state has its own rules about who will get your property if you die without a will. Generally, what happens is that the state creates categories of closest relatives. If a person falls within a category of closest living relative, he or she gets all or part of your estate, depending on whether anyone else also falls within that same category. Persons who are in lower categories of relationship then generally receive nothing. Here is an example of a state's inheritance categories:

If you execute a will during your lifetime, you exercise control over what happens to your property — including your business — after your death. If you don't do this, the state in which you live in effect will write one for you. Unless you have no interest at all about what will happen to your property after your death, this is something that should be avoided.

Although death is not something that most of us like to think about, the fact is that unless you're willing to face up to this unpleasant thought now, chances are that the people who you wish to receive your property after your passing will end up disappointed. Why? Because if you die without having made out a valid will, the state in which you live, and/or where the property is located, will have an idea about what should be done with it — and this idea may be radically different from what you have in mind.

If you die intestate — that is, without a will — the state where you have your permanent residence (and, if different, the state in which your real estate is located) will apply its probate laws to determine how your property will be split up among your closest relatives.

The subject of how best to pass along your accumulated wealth at death is usually referred to as "estate planning" by lawyers, accountants, and other professional planners. You may see the word "estate," think of something out of "Lifestyles of the Rich and Famous," and decide, "Well, at least that is something that I don't have to worry about." Not so fast! Even if you presently have only rather modest wealth, you're probably a candidate for at least some basic estate planning. And your ownership of a small business only increases the likelihood that you will have an estate planning need.

"Tenancy in common" is an old English common law concept which is generally applied any time two or more persons, who are not husband and wife, are entitled to the possession and use of the same property. The owners may own unequal interests (shares) and may have received their interests at different times and through different means (grant, deed, inheritance, will, etc.). The important distinction between tenancy in common and other types of co-ownership is that, upon death, each owner's interest passes to his heirs or those named in his will. There is no right of survivorship which transfers the decedent's interest to the other co-owners.

On bank accounts or other types of investments co-owned by two people, you may see the abbreviation "JTWROS." That means that the bank or other institution is treating the ownership as a joint tenancy. Without this, or similar language, the law assumes a tenancy in common is created.

Tenancy by the entirety is a form of co-ownership that applies only to a husband and wife while they are married. It is based on the old common law view that a husband and wife are one person for purposes of owning property. As long as they are still married, neither the husband nor the wife separately have an interest that can be sold, leased, mortgaged or liened against. Nor can the property be partitioned or divided between them. Each spouse has an undivided interest in the whole property and the right to sole ownership when the other spouse dies. It is therefore necessary that any document relating to property held in a tenancy by the entirety be signed by both husband and wife.

Community property, also called marital property, is recognized in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, but the laws vary from state to state. In these states, property is generally divided into two categories: separate property and community (marital) property. Be aware that if you have ever lived in one of these states while married, property that became "community property" in that state retains that character even if you move to a non-community state.

When you "own" property, you have the exclusive rights to possess and control the property, to use the property for pleasure or for profit, and to dispose of the property during your lifetime by contract, deed, grant, lease, or gift; or to dispose of it at death, by inheritance, bequest, or devise. You also have the responsibility for all expenses and other charges in connection with the property.

Federal law allows for a bankruptcy to be recorded as part of a debtor's credit history for 10 years. Whether or not the debtor will be granted credit during the years following bankruptcy is unpredictable. In some cases, it may actually be easier to obtain credit, because potential new creditors may feel that, since the old debts have been discharged, they will be first in line for future payments. They also recognize that the debtor cannot file again for bankruptcy for at least the next six years.

Bankruptcy may make it possible for a financially distressed individual to:

The Bankruptcy Code is divided into chapters. A debtor who is an individual (as opposed to a business entity) typically can make one of two choices for filing bankruptcy; a Chapter 7 "Liquidation" (the traditional bankruptcy) or a Chapter 13 "Adjustment of the Debts of an Individual with Regular Income."

The United States Constitution empowers Congress to establish uniform bankruptcy laws throughout the country. Our founding fathers understood that persons burdened by overwhelming debt sometimes need a fresh financial start in order to reestablish productive lives unimpaired by their past financial crises. A person mired deep in financial turmoil should consider using bankruptcy to achieve such a fresh start.

If you are awash in red ink and can't pay your bills, you need to act quickly to rebuild your credit. There are a number of solutions, with bankruptcy as a last resort. Also read the pamphlet, Surviving Debt, Counseling Families in Financial Trouble, put out by the National Consumer Law Center. It should be available through your local library or contact Publications, NCLC, 18 Tremont Street, Suite 400, Boston, MA 02108, telephone (617) 523-8010. What with all the recent news of foreclosures, this is a popular site and resource.