Wills and trusts are both estate-planning tools that can help ensure your assets are protected and bequeathed to your heirs. However, the transfer process becomes more involved when passing wealth to a subsequent generation. We highly recommend consulting with a legal advisor since both of these are legal documents and there are a number of state-specific requirements and issues.
A will is a written document expressing a deceased person's wishes, which could include any intent from naming guardians of minor children to distributing assets upon death. Trusts are generally active the day you create them, and a grantor may list the distribution of assets before their death, unlike a will. Unlike a trust, most wills (excluding those that fit within the “small estate” limit) go through probate and can also be contested.
- It’s a legally enforceable document stating how you want your affairs handled and your assets distributed after you die
- Can include a directive of how you want your funeral or memorial managed
- Your estate becomes part of the public record, and anything left by a will typically goes through probate court
- Retirement accounts and life insurance policies that pass straight to beneficiaries don’t go through the probate process
- If you have minor-aged children at home, it's important to have a will that appoints guardianship of your children
- A will allows you to disinherit a child or spouse under certain circumstances
- If you die without a will, a condition called intestate is enacted, and courts follow a set formula for how to divide your assets, which could result in actions that negatively impact a surviving spouse or child
- If your estate is worth less than $11.7 million, there's no estate tax return required, and you won’t be charged an estate tax
Revocable Living Trust
- It’s called a living trust because it's created and maintained while the owner/trustor is alive and is revocable because it may be changed during the life of the trustor
- It holds a fiduciary relationship in which you give another party authority to handle your assets for the benefit of a third party
- There generally aren’t court or attorney fees after the trust is established
- Your property can pass immediately and directly to your named beneficiaries, skipping the probate process
- The contents of the trust can rarely be challenged in court, and the contents of the trust are held private
- One isn’t better than another, but if any issue arises, a living trust will most likely override a will
- To be valid, a trust must identify the following: the trustor, the trustee, the successor trustee, and the trust beneficiaries
- When set up properly, trusts can reduce how much of an estate is taxed at the 40% rate
Nearly everyone should have a will, but not everyone needs a trust. For more clarification and to properly set up your estate so that your intentions are handled as you wish, contact our office today.
This document is for educational purposes only and should not be construed as legal or tax advice. One should consult a legal or tax professional regarding their own personal situation. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products offered by an insurance company. They do not refer in any way to securities or investment advisory products Insurance policy applications are vetted through an underwriting process set forth by the issuing insurance company. Some applications may not be accepted based upon adverse underwriting results. Death benefit payouts are based upon the claims paying ability of the issuing insurance company. The firm providing this document is not affiliated with the Social Security Administration or any other government entity.
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