Do you really need a trust?

Do you really need a trust?

Although many people equate “estate planning” with having a will, there are many advantages to having a trust rather than a will as the centerpiece of your estate plan. While there are other estate planning tools (such as joint tenancy, transfer on death, beneficiary designations, to name a few), only a trust provides comprehensive management of your property in the event you can’t make financial decisions for yourself (commonly called legal incapacity) or after your death.

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Do you really need a will?

You May Not Think You Need a Will, But You Really Do.

Most Americans do not have a simple will as part of their estate plan. You might believe that a will is only for the rich and famous, and not the average person who has a far smaller net worth. On the other hand, you may think that a will is entirely unnecessary since you have a trust, jointly owned property, or have named beneficiaries on your insurance.

So, do you really need a will? The short answer to this question is “yes.” In fact, everyone who owns anything – no matter how little value it may seem to have – should have a will. This is because a will puts you in charge of directing others on your wishes and distribution of assets upon your death. Without a will or other estate plan – referred to as intestacy – you have no control and your state’s rules determine who gets what after your death. Even if you have a trust, jointly owned property, or have named beneficiaries on your insurance, a will is an important, even as just a “backup” plan.

As a practical matter, the simpler your affairs are – typically, the fewer assets you own – the less complicated your will and overall estate plan is going to be. Surprisingly to most, it does not take much to complicate your estate. For example, if you have minor children your will must name a guardian for those children in the event of your death. Likewise, if you have a relative who is disabled, elderly or without the financial sophistication to manage your assets after your death, a will allows you to name someone to watch over these assets for your loved ones in a special needs or supplemental needs trust. And, these are just two examples of the many things that can complicate your affairs and your estate plan.

Many people believe if they have made beneficiary designations on life insurance policies, property deeds or retirement accounts that a will is not necessary at all.  While it is true that those particular designations will ensure the right people you elected will receive benefits or inherit those assets, the distribution stops there. If there are other assets that you own – such as a car, a china set, or jewelry to name a few – or if you would like to give part of your estate to a charitable organization, a will is essential to your estate planning needs.

Furthermore, when a person dies without a will (referred to as intestate), the estate goes into probate. Probate is a judicial proceeding by which the court decides the rightful heirs and distribution of assets of a deceased. Going through probate can be both more time consuming and expensive without a will than it is with a will. This is because your will can waive certain probate requirements (like having the executor post a bond or obtain judicial approval to have an estate sale). At the same time, probate without a will follows the governing state’s intestacy laws which may likely result in a less-than-perfect split of assets that not only may not be in line with the deceased’s wishes but may leave many surviving loved ones unhappy. Consequently, for many reasons the creation of a will can fill in gaps of property assignment or plug holes in beneficiary claims on life or other insurance policies.

Family dynamics also play a part in estate planning, something state intestacy laws do not account for. Many people have blended families. There may have been second or third marriages. Older couples may choose to cohabitate after a death or divorce and never legally get married. You may have to treat your children differently on current accounts due to distance, and without a will, those assets will not be distributed fairly.

It is important to note that a will can also include a no contest clause, reducing the likelihood that potential heirs from arguing over its contents, something that simply isn’t possible if you don’t make a will.

Creating a will as part of your estate plan is primarily about passing your wealth to your loved ones after you die since a will only “works” after it’s gone through the probate court process. It really is about giving you both independence and control of what happens to your assets after your death. Instead of leaving the distribution of your property to local intestacy laws, a will can put your wishes down on paper and direct a selected person to carry out your desires exactly as expressed. Look for our upcoming post to learn more about another, more comprehensive strategy, the revocable living trust.

The Difference between Lifetime and Deathtime Planning… and Why a Comprehensive Plan Must Include Both

 

How You Can Build an Estate Plan that Includes Asset Protection

Much of estate planning has to do with the way a person’s assets will be distributed upon their death. But that’s only the tip of the iceberg. From smart incapacity planning to diligent probate avoidance, there is a lot that goes into crafting a comprehensive estate plan. One important factor to consider is asset protection.

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Life Insurance and Estate Planning: Protecting Your Beneficiaries’ Interests

Life Insurance and Estate Planning: Protecting Your Beneficiaries’ Interests

One misconception people have about life insurance is that naming beneficiaries is all you have to do to ensure the benefits of life insurance will be available for a surviving spouse, children, or other intended beneficiary. Life insurance is an important estate planning tool, but without certain protections in place, there’s no guarantee that your spouse or children will receive the benefit of your purchase of life insurance. Consider the following examples:

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5 Reasons to Embrace the Emotional Nature of Estate Planning

5 Reasons to Embrace the Emotional Nature of Estate Planning

When you hear the phrase “estate plan,” you might first think about paperwork. Or your mind might land on some of the uncomfortable topics that estate planning confronts head-on: end-of-life decisions, incapacity, and your family’s legacy from generation to generation. Those subjects hit home for everyone.

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How to Choose a Trustee

How to Choose a Trustee

When you establish a trust, you name someone to be the trustee. A trustee does what you do right now with your financial affairs – collect income, pay bills and taxes, save and invest for the future, buy and sell assets, provide for your loved ones, keep accurate records, and generally keep things organized and in good order.

The Key Takeaways

  • You can be trustee of your revocable living trust. If you are married, your spouse can be co-trustee.
  • Most irrevocable trusts do not allow you to be trustee.
  • Even though you may be allowed to be your own trustee, you may not be the best choice.
  • You can also choose an adult child, trusted friend or a professional or corporate trustee.
  • Naming someone else to be co-trustee with you helps them become familiar with your trust, allows them to learn firsthand how you want the trust to operate, and lets you evaluate the co-trustee’s abilities.

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Why Factoring Long-Term Care Into Your Estate Plan Pays Off

Why Factoring Long-Term Care Into Your Estate Plan Pays Off

For most people, thinking about estate planning means focusing on what will happen to their money after they pass away. But that misses one pretty significant consideration: the need to plan for long-term care.

The last thing any of us want to contend with when a health issue arises later in life is having to throw together a hasty estate planning solution in the face of mounting medical costs. Your best defense is careful planning with the help of a trusted expert.

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3 Ways to Minimize Estate Planning Fees

Today, it is impossible to put together even a simple estate plan without the assistance of an experienced estate planning attorney. Why? Because estate planning laws vary greatly from state to state and these laws are extremely convoluted and constantly changing.

One wrong word, one missing signature, or one procedure not followed to the letter of the law can partially or completely invalidate a Last Will and Testament, Revocable Living Trust, Advance Medical Directive, Living Will, or Durable Power of Attorney.

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How to Avoid High Octane Stress and Organize Information for Your Family

How to Avoid High Octane Stress and Organize Information for Your Family

Think, for just a few moments, about what would happen if you suddenly became incapacitated or died. Would your spouse or family know what to do? Would they know where to find important records, assets, password, usernames, and insurance documents? Would they be able to access (or even know about) online accounts or files on your computer?

Would they know whom to ask if they need help? Would they miss assets or insurances you’ve paid for? Not knowing what’s out there, where to find it, and how to access it is extremely stressful and burdensome. If you put all of your information in a safe place and let loved ones know where it is, you’re providing for and protecting your family, instead of dumping stress on them at an already stressful time. Putting the effort in now, to establish a formal document inventory, will alleviate unnecessary anxiety and turmoil at one of the hardest times of their lives.

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