Estate planning is one of the most important things we can do for the people we love most, and it is never too early to start planning how to provide for your family once you are gone. Organizing your affairs in preparation for the end of your life is an important task, and estate planning is an ongoing process that includes much more than writing a will. This type of planning helps determine who can make decisions on your behalf, who takes care of your dependents, and how to avoid unnecessary taxes and waiting periods.
The biggest benefit of estate planning is peace of mind—you’ll know your wishes will be fulfilled for the benefit of your loved ones. At the very least, everyone should have a simple estate plan in place.
Elements of estate planning
Most of this process consists of creating and finalizing estate planning documents, such as wills, trusts, powers of attorney, and living wills. You can be as detailed as you want. Some people even include a letter of instruction with their estate to walk their family members through the documents. We at SDV Financial consulting, we provide this service to cover all the elements of estate planning. Let us begin with a brief understanding of Wills and Trusts.
Will
A will, formally called a “last will and Testament” is a legal document stating how you want your executor (the person legally obligated to administer your estate) to distribute your assets when you die. Dying without a will is known as dying “intestate,” which means state law will dictate what happens with your estate. Probate refers to the process of distributing your estate after you’ve died. Your estate will go through the probate process whether you die with or without a will, but having a will ensures your executor honors your wishes. Going through probate court without a will is more time consuming and expensive, with the money coming out of your estate first. If you already know where you want your assets to go, it’s easy to make a will without Lawyer. Our services offer interactive questionnaires to help you create a legally binding will specific to your state.
Trust
A trust is a legal contract that allows another person (the “trustee”) to hold property for you (the “grantor”). This is typically so the beneficiaries (individuals or institutions who stand to inherit something) can use the property at some point in the future. You can place money, physical assets, or anything else of value in a trust.
Trusts are also helpful to hold property when beneficiaries are minor children who are not yet fit to handle their full inheritance. In that situation, the property will stay in the trust until the beneficiaries reach a certain age.
Property is also distributed faster in a trust because you avoid a lengthy probate court process, so it’s sometimes preferred for that reason.
So, here’s a quick recap on difference between a Will and a Trust.
#1: Trusts help you avoid probate, whereas wills don’t.
A key estate planning objective is to avoid the probate process. If you use only a will, chances are good your remaining assets will pass through probate.
#2: Trusts typically allow for much simpler tax planning than wills.
When you pass away, taxes will likely need to be paid at several levels (from local probate taxes to the federal estate tax). Using a trust allows you to anticipate these taxes.
#3: Wills are only effective after your death.
Wills are only relevant after the decedent has passed. Trusts (living trusts in particular) can be effective while you’re alive if you become unable to manage your own finances.
#4: Trusts require you to retitle assets.
A trust must own assets for it to work, which means you must retitle your assets in the trust’s name while you’re alive. When you use a will, assets remain in your name until you pass; afterward, the executor is responsible for retitling them to your estate.
#5: Trusts simply do more than wills.
As mentioned in #3 above, wills are only effective upon your death, so their usefulness is limited to the transfer of assets at that time. Trusts allow for more customization and can be written to suit almost any goal.
One of the most common questions we hear is “Do I need a will, a living trust, or both?”.
While there are multiple ways you can prepare your estate for after you die, the reality is that wills and trusts are tools. They accomplish many of the same things, but each offers advantages that the other does not and we can help you with this process in an easiest and affordable way. Protecting your assets and caring for your beneficiaries are essential components of intergenerational wealth management, and creating an estate plan that’s tailored for your specific situation can help to ensure your wishes are carried out appropriately. We recognize that all of this is a lot to think about! The good news is that you don’t have to figure it out alone. Just schedule a consultation with us and we can present what services we offer in this space. Together, you can decide whether your needs will be best served by a will, a trust, or both.
