Family circumstances and personal goals change over the years, they always will. When was the last time you’ve taken the opportunity to review your state planning strategy? Law changes in the past few years may have impacted your strategy without you even realizing it. Maybe you’ve had a will written, but would a trust be an appropriate addition to meet your goals? What is a living trust and should you consider one? Find out now.
Trusts vs. Wills
If your wishes are a little more detailed than simply all of your assets going to your spouse, a will is necessary to have in place. Wills and trusts serve different purposes. So depending on your goals, you might want one or both.
A key difference between wills and trusts is that a will goes into effect after one’s death, a trust goes into effect immediately. A trust avoids probates, protects privacy, but is more complex in costs and paperwork to get it set up. A will has the capacity to provide guardianship for minor children or pets, which a trust cannot. A trust generally takes precedence over a will, and is far more difficult to successfully challenge.
A will is a legally binding document that lays out exactly how to designate your assets upon death. A trust creates a separate legal entity where the individual is able to hold assets for the beneficiaries. A trust affords the individual the opportunity to outline rules and conditions for how their assets will be distributed. If they want an inheritance only to take place after a certain amount of time or when a beneficiary meets a certain age, they can do that. The fact that you can designate guardianship in a will and not in a trust is the primary reason one would have both a will and a trust.
What is the Purpose of a Trust?
Overall, trusts offer greater control of assets for the price of a more tedious setup, and the need to be actively managed. Trusts are mainly there to provide legal protection for your assets, make sure everything is distributed according to your wishes, and reduce or avoid unnecessary taxes. A trust is an ideal option for underage or mentally disabled beneficiaries, who might not have the ability to wisely manage their finances. There are multiple different types of trust funds, it depends on your assets and circumstances which one would be best for you. No matter what type of trust or will you go with, it’s necessary to consult a professional on the matter.
What Are the Benefits of a Living Trust?
Avoiding probate is one of the top reasons for using a trust. Probate is a court-supervised procedure to verify your will is authentic. The probate approves the executor you’ve chosen, as well as assesses and locates all of your assets for distribution. When all is said and done, taxes, funeral expenses, and debts are taken out and the remaining assets are distributed. The cost of the probate process often ends up being around 5% of your estate, not to mention the time and stress put on your family’s shoulders. A living trust skirts around this. The assets you place in your trust bypass probate. With the right planning, you can help your family avoid this process entirely.
By avoiding the probate process, you also protect your family’s privacy. If they’re able to stay away from court supervision, where your assets went and who inherited them will not become public knowledge.
Getting Started With Estate Planning
Estate planning is both complicated and of the utmost importance. Why? You’re talking about all of the wealth you’ve spent your life working for, and how it’s now going to affect your family. It’s not something to be taken lightly. Chris Haro and his team have over 20 years of experience in accounting and tax preparation services. Our financial experts work from two locations in California to offer high-quality services for businesses and individuals alike. We would love to have a discussion with you about your plans for your estate and how to make that happen. Contact us today to start the conversation.