The best way to control where your belongings and assets will go after you have died is by establishing a will or trust while you are alive. If you do not do this it may be difficult for those who you want your assets to go too to be able to enjoy them fully. Read on to learn more about the differences between wills and trusts. Our team of experienced estate planners is also here to help you make the best choices for the future of your beneficiaries.
Passing Assets Between Spouses and Family
Usually passing money and possessions from one spousal partner to the other is not an issue. The United States Estate And Gift Tax Law contained an unlimited marital deduction. This means you can pass wealth to your surviving spouse without penalizing estate tax or gift liabilities. That said the process of transferring becomes far more complex when wealth is passed to other family members. When assets that are individually held are titled properly, the process should be smooth. However, many estate planners frequently see significant errors in the titling of individual assets, not to mention in some cases designated beneficiaries who would be certain to cause upset in even the most contented of homes.
What Is A Will?
A vital part of estate planning, a will is a document that is legally enforceable that states how you want your assets distributed and your affairs handled once you have died.
If you have children of minor-age in your household, your will should include the appointment of guardianship of your child or children. If this is not done, the surviving family members will have to go to a probate court so your children can have a guardian appointed. obviously, that person may not be an individual you want your kids to be entrusted with.
Through a will, you may also want part of your estate to go to a minor child or children. A will means your decisions are going to be carried out by the judge who presides over the transfer of your estate. A will allows you to give direction and insight regarding the handling of the assets to be received by your beneficiaries.
In your will, you can state how you would like your beneficiaries to use the assets, within reason! Children (birthed or adopted) have a statutory right to inherit, a will allows you the option of disinheriting a child if that is what you want. Nonetheless, you will have to be aware of the laws in your state. Some states are common law states, others equitable distribution states and others still are community property states. A spouse may only be disinherited in a community property state. Each situation carries a separate group of stipulations on how much and what can be disinherited – it is also important to realize that a person can only disinherit a child or a spouse through a will.
When creating a will you should seek legal counsel. A will is effective in legal proceedings and estate transfer after you have dies – but there are other considerations. For example, it is mandatory anything left in a will goes through a probate court and the estate will become part of public record.
What Is A Trust?
A trust is a fiduciary relationship where you have given authority to another party who handles your assets on behalf of your beneficiaries.
A trust is essentially a method of estate transfer. There are many reasons to create a trust and there are many different kinds of trust. In general terms, there are two kinds, a living trust and a testamentary. A testamentary trust can be created by a will – you may also want to avoid probate court handling your affairs and you can create a living revocable trust to do that.
When it comes to estate transfers, a living revocable trust can help. A trust requires you to transfer your property to your loved ones following your death. This is known as a living trust as it is created while the trustor (or property owner) is alive. Ownership of the property is maintained by the trustor and held by the trust while the trustor is alive. The trust kicks in once the trustor has died. One difference between a will and a living trust is that with a living trust, the property passes outside of probate court. There are no attorney fees or courts to go too once the trust is established. Your directly named beneficiaries can receive their property immediately.
Treats are not expensive to create. A trustee needs to be named and they control the asset distribution as per the desires of the trustor in accordance with the mandates of the trust document. This means a trust can be an excellent way to transfer estate.
The probate court is the place where those who stand to inherit your assets may spend months addressing and sorting out aspects of your estate if your plans are not efficiently laid out and transferred smoothly. It is also expensive, it can cost up to 4% because of court costs and attorney fees. Some of this will include the examinations of your testamentary will, as well as arranging the transfer of your estate, the selection of will executors, the appointment of guardians for your minor child or children and the setting up of trusts for your survivors. It can be a protracted and drawn-out process. The responsibility of your executor to sort out the various aspects of your estates may take up to 18 months depending on the intricacy of the trust. You probably do not want your eldest child having to repeatedly attend court hearings at a time when they are going through the emotions of mourning the loss of a parent.
- If you lack an estate transfer plan, the federal government and the state in which you reside will have one drawn up for you. Make this a priority now so time and money can be saved later
- Seek the advice of professional advisors for investment, legal and tax purposes regardless of whether you choose a trust or will
- Trusts are more expensive and can be laborious to set-up, they also need to be managed regularly. However, they do offer the advantage of being more in control of the assets you wish to bequeath.
Jarrell, Matthew. “Will vs. Trust: What’s the Difference?” Investopedia, Investopedia, 17 Apr. 2019, www.investopedia.com/articles/personal-finance/051315/will-vs-trust-difference-between-two.asp.