Using wills and trusts in your estate plan
Wills and trusts are two very powerful and important estate planning documents that should not be undermined in your estate plan. Some people prefer using a trust over a will because a trust avoids probate whereas wills are always subject to probate. But is this enough reason why a trust should be preferred? The answer lies in knowing all about Wills and trusts, the differences, and how these can be applied in your estate.
Wills
A will is a legal document in which you express what you want done to your assets when you die. With a will, you can lay down instructions on the sales of your property, distribution among your chosen beneficiaries or to charity, and chose a guardian for your minors.
Features of a will
- States how your properties will be distributed after your death. Only assets in your name can be handled by a will. Jointly owned assets, retirement accounts and life insurance proceeds are not distributed according to a Will, since such assets already have designated beneficiaries.
- Must contain the name of your beneficiaries and executor who would be in charge of executing your will under court supervision when you die.
- Only takes effect after you die.
- Can be used to appoint a guardian for minors.
- Can be quite simple to establish.
- Can be updated anytime before your death.
- A will must go through a legal process known as probate. This process is often tedious.
- There is a type of will which passes outside probate. This type of will, called a Pour-over will, is very beneficial and is used alongside a trust. Your estate planning lawyer would better explain to you how this can be done.
Living will
This type of will does not distribute assets after death. It is used to express your desires concerning what you want done to your body during end-of-life situation.
Trusts
A trust is a very important estate planning tool. Generally speaking, you create a trust by appointing a trustee who then holds legal authority over the assets transferred to the trust. With the terms of the trust, you can lay down instructions about how the trust assets will be handled, but the funds can never be used to benefit you directly.
Features of trusts
- A trust goes into effect during your lifetime. Once you transfer property into the trust, it takes effect immediately.
- Used for transferring assets outside of probate. This is one major reason why people use trusts instead of wills. For personal property, you must assign the property to the trust. For certain assets such as real estate, non-tax-qualified financial accounts and vehicles, you must rename such assets in the name of the trust. By so doing, these assets will pass to your beneficiary outside probate since probate is only for assets which are in your name.
- Avoids court publicity. Your trust property pass on to your beneficiary without having to declare your estate value during probate as a Will does.
- Must name a trustee. You can be the trustee of your trust during your lifetime but must name a successor trustee to carry out your trust instruction when you die.
- An irrevocable trust can never be altered once created. All assets in an irrevocable trust permanently leaves your ownership and as such, would not have estate tax imposed. It is a perfect way to avoid taxes and creditors.
- A revocable or living trust can be changed or altered during your lifetime whenever you like. You can take away any property from the trust and such property will again take your name. This type of trust does not offer very good tax exemption since your trust assets are still seen as yours since you can still take them away from the trust.
Benefits of wills over trust
- Easier and less expensive to create
- You can use your assets as you like until death as opposed to trusts.
Benefits of trust over wills
- Avoids the publicity, expenses, complexity and headache of probate.
- Offers estate tax advantage over Wills.
- Can be used to transfer property during your lifetime.
Estate Planning Attorney near me 10039
As have been seen, wills and trusts offer varying benefits. While one document can be enough to handle one estate, another may require both. Trusts are highly beneficial when you have assets in multiple states. An estate planning attorney 10039 will offer your professional advice on what document to use, to combine both in your estate plan, and what assets to transfer to your trust. The estate attorney would find the best way possible to create an estate plan that offers you the best estate tax savings. As tax laws, estate and probate laws always vary from place to place, be sure to stay updated in your estate plan by contacting the estate planning attorney 10039 if you’re living living anywhere within this area code.