Know The Two Staples of Estate Planning – Trusts and Wills
Planning for after your death can be difficult. However, deciding how to distribute your assets is critical for your family and your legacy. If you neglect to plan for your succession, your assets may end up in legal battles with your loved ones, and you don’t want that. Therefore, it is critical to get started with the foundation of inheritance planning. So, let’s discuss wills and trusts.
What Are Trusts and How Can They Be Used?
A trust is a legal mechanism that enables a third-party fiduciary to manage and direct trust assets on behalf of the beneficiaries.[1]
With a trust, you can control where your money goes and when your beneficiaries access it. You may also lower taxes and court costs by including a comprehensive will. Your beneficiaries may also be protected from creditors or divorce-related losses if you create a trust. If you desire, you may also specify where residual assets should go if a beneficiary dies. This can be helpful in a family with stepchildren or second marriages.[2]
One of the main benefits of trusts is that they allow you to pass on assets quickly and privately. Setting up a trust can help you avoid the lengthy probate court process that is associated with wills.
What are Wills and How Can You Use Them?
A will can help you make sure that your assets are distributed according to your wishes upon your death. Your will may include instructions on how to distribute real estate, investment, or retirement account assets, as well as money and heirlooms. A witness must also sign the document.[3]
However, settling an estate entirely through a traditional will may trigger what’s known as the probate court process.[4] Basically, a judge, not your children or other beneficiaries, has the final say on who gets what. The probate process can also drag on for months or even years and may even become public.
How to Use Wills and Trusts to Minimize Taxes
You don’t have to choose between a will and a trust. You can utilize both to ensure that your estate is managed as you wish after your passing. Having these legal documents in order can help you prepare to minimize taxes associated with legacy planning. Working with an advisor can help you take the next step to integrate a tax-minimization strategy into your plan. Talk to us today for a complimentary meeting to get your estate planning on track.
