While no one wants to prepare for his own demise, if you have considerable property or even just a few valuable things, setting up a plan to dispose of your assets after your death is important.
You have several estate planning options available to you, but the most common are wills and trusts. Determining whether to use primarily a will, trust, or both depends on individual circumstances.
At any time you can contact us to set up a confidential, no-obligation conversation about what will serve you best.
Trusts and wills are both legal ways through which a person can pass on assets to others after death, however each accomplishes different goals. Many people wish to spare their relatives from going through probate. To remedy this, they choose a living trust because assets held in this manner are not subject to probate.
Will Vs Trust: What’s The Difference?
A will is a written document expressing a deceased person’s wishes, from naming guardians of minor children to bequeathing objects and cash assets to friends, relatives, or charities.
It does not allow slow distribution of your assets, creditor protection for your beneficiaries, nor does it avoid probate.
One primary thing to remember with probate is the similarity between having a will and having nothing: in both instances your estate will pass through the hands of the probate court. This is time consuming and costly as the court must supervise the distribution of the assets.
• Collect your assets
• Pay liabilities
• Validate your will
• Determines if anyone who contests the will has a right to your assets and how much they are entitled
• It can cost your estate and/or heirs 3% and more often, much more
• Can take years to complete
• Court documents are public records, so anyone can take a trip down to the courthouse to see how your estate was distributed.
Note, if your assets are titled jointly with your spouse, a probate may only happen after you are both gone.
Trusts Can Keep Your Heirs Out Of Probate Court
Like a will, a living trust is a document you can use to name beneficiaries for your property. Using a revocable living trust instead of a will means assets owned by your trust will bypass probate and flow to your heirs as you’ve outlined in the trust documents.
The grantor can manage the trust until death, at which time a trustee will take over to safeguard and manage the property and assets in the trust. This is the person who will distribute the assets to the beneficiaries according to the specifications contained in the trust document.
Revocable Vs Irrevocable Living Trusts
The two most common types of trusts are revocable and irrevocable. Revocable living trusts are trusts that may be changed or altered during the life of the grantor. As the name implies, an irrevocable trust cannot be revoked once it is created; in other words, if you put property in the trust, you cannot take it out.
Irrevocable trusts, often created for tax purposes, are commonly used to preserve assets. Both types may hold real property, investments, bank accounts, and other assets.
Benefits of a Living Trust:
• You maintain control
• Pass assets without probate
• Hard for someone to contest
• Distribution of assets is faster
• Protects you if you are incapacitated
• Eliminates/reduces gift taxes, inheritance taxes, estate taxes, and capital gains taxes
• Easy to create and maintain
• Ensures you do not disinherit your Grandkids
• Provides legal protection (after your death) for your beneficiaries
The grantor is usually the initial trustee of a revocable living trust.
Trusts Provide For Life And Death
A will does not go into effect until you pass away. However, your trust documents are effective immediately, so you can include things like end-of-life directives and who should act as your guardian in the event that you’re incapacitated.
The person named in the trust as a successor trustee is obligated to follow your wishes in the event you are incapacitated or pass away. They become responsible to manage the assets for or transfer them directly to the trust’s beneficiaries as you direct in the trust agreement.
While a will determines how your assets will be distributed after you die, a trust becomes the legal owner of your assets the moment the trust is created. After you create the trust, you must take the additional step of transferring your property into it. The assets in the trust then avoid probate and state laws governing wills and estates.
While information in a trust usually remains private, wills become public documents and go through probate. The grantor can change the terms of the trust during his or her lifetime, just as the terms of a will can be changed.
Only the assets whose legal ownership has transferred to the trust avoid probate and are governed by the trust agreement.
Trusts are Private
Wills are public record. A trust is not filed with the court or recorded in the public records so the terms and the beneficiaries remain private. Because there is no probate, survivors do not have to reveal the extent of the living trust’s assets through a public filing as happens with probate. This is ideal for people who want to avoid probate and keep the details of their estates private.
Living Trust Advantages
• A trust may cause less of a burden on your family
• maintain privacy over who is receiving your property
• save time
• save money
• potentially eliminating estate taxes for some individuals
In some cases, a properly drafted trust may defer, limit, or even avoid the imposition of federal estate taxes.
The Benefits in Distribution of Estate Assets
Trusts enable the grantor to determine who receives the money, when they receive it, and what conditions must be met. If you’d like to leave a child a monthly gift instead of a lump sum you’re concerned they’ll spend in a short time, you have the ability to set up the terms of your trust that way.
You can determine the terms of distribution for every asset in your estate. Distributing assets through a trust can also be quicker than distributing assets through a will.
An irrevocable trust also allows you to make more detailed provisions regarding the use of your estate, as well as offers you protection from creditors or potential litigants. Your property can be passed immediately and directly to your named beneficiaries.
As long as the trust is funded, the freezing of assets will not be allowed. That includes certificates of deposit , stocks, bonds, mutual funds, real estate, businesses, etc.
If you’re still not clear about the path you want to take in regards to estate planning, our team will help you determine the best way to legally protect your hard-earned assets and pass them on to who you want when you want. You have many options and we’ll help you protect your legacy with the best answer for you.
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