Do You Need a Will and a Trust?
All of us want to ensure that our loved ones are taken care of even after passing away. That’s why you need an estate plan in the first place. The question is, how do you know whether you have everything in place for when you pass away?
To get started, it’s essential to know the difference between a will and a trust:
- A will outlines your desires for what happens to your property after your death and appoints a legal executor to carry them out. Changing your will is always possible.
- Wills are a public record because they must go through probate to be proved. In contrast to wills, trusts are not subject to probate, allowing their provisions to be kept secret from other parties.
- While still living, it is possible to establish an inter vivos trust (also known as a revocable or inter vivos trust). It is possible to distribute assets held in a living trust while you are still alive or to your beneficiaries after you pass away. A revocable trust can be changed at any moment because you maintain ownership of the property, even though the legal title to the property is retained by the person or organization to whom the property is handed. For tax reasons, you are still regarded as the owner of the property since you are in charge of its fate. However, you have the option of transferring the trust’s assets to a charitable organization instead of changing the beneficiary.
- An irrevocable trust is established throughout your lifetime. Once the trust is set, and the property is transferred to the beneficiary, you no longer control the property and cannot modify the trust. You may use irrevocable trusts to avoid paying taxes on assets that you don’t want to leave to your loved ones after your death. Creditors cannot seize the trust property.
Fully protecting your family and other beneficiaries may require both a will and trust. Each has its own set of benefits and drawbacks, but they give more comprehensive protection when used collectively. Trusts, for example, do not enable you to choose a guardian for your children, although wills do. In the same way, your will can indicate your funeral desires or who you want to inherit your watch collection. This is something that trusts can’t accomplish. Trusts, on the other hand, can be used to prepare for unanticipated circumstances like infirmity or to do significant tax planning.
In addition, there are several forms of trust. Trusts that are “revocable” and “irrevocable” are only the tip of the iceberg. You could wish to place some property in a revocable trust and other property in an irrevocable trust, depending on your objectives.
End-of-life considerations are another facet of comprehensive planning that isn’t completely covered here. Consider if you want a do-not-resuscitate order or whether you want life-saving procedures conducted to save your life. If you cannot make these choices for yourself, choose a particular person or persons to make them for you. To handle these concerns, you may wish to incorporate a “living will” in your estate plan.
Estate planning is complex and constantly changing. Connect with Simple Wills & Trusts to be matched with an attorney in your state.
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