One common misconception is that, if you are young and not too wealthy, you don’t really need an estate plan. The truth is, everyone has an estate, regardless of wealth, so everyone needs an estate plan. Your estate is made up of your personal property, bank accounts, retirement accounts, life insurance policies, and real estate. All of these possessions can disposed of through a will or trust. If you don’t have a will or trust, on the other hand, the probate court will decide who get your property after your death. Most clients would rather make those decisions for themselves. Creating an estate plan is the easiest way to do that. Whether a will or trust is best for you is something you should discuss with an experienced and qualified estate planning attorney.
Those who have only a few possession, but do not own a home or vehicle, believe they have no reason to create a will. What many clients fail to consider are the personal possessions that may have sentimental value. For instance, who do you want to get your family heirlooms, your wedding ring, your family photos? Something else to consider if you have children is who should be their guardian if you die while they are still minors. The same is true for your pets. If you die without a will, the state will make all of these decisions for you.
Contrary to what many people believe, trusts are not created primarily as tax shelters. Although they do come with certain tax benefits, trusts are most often used to ensure that your family will have the funds they need in the future, once you are no longer there to provide for them. Trusts also help your family avoid the need to go through the probate process which is time consuming and expensive. They can prevent the need for a court proceeding known as a conservatorship, as well, if you ever become incapacitated.
Many people assume that, if they die while their children are still minors, the family that survives them will automatically take them in and care for them. The truth is, if you do not address this issue in your estate plan, a judge will ultimately decide who will raise your children. A judge many not share your family values or religious beliefs, so your views on proper child rearing may not be taken into consideration. If you have a will that identifies a guardian for your children, you can maintain control over your children’s future.
After your will has been created, your estate planning is not necessarily complete. With a will or trust, it is just as important to keep it updated. If your assets grow or shrink, you get married, divorced, have a child, or one of your heirs dies, it is very likely that you will need to change the terms of your will or trust. A will or trust can be modified at any time during your lifetime provided you are still mentally competent.
If you create a living trust-based estate plan, after your trust has been created, there is one more very important additional step. All of the property or assets that you intend to be controlled by the trust must actually be re-titled into the name of trust. This is known as funding the trust. In most cases it simply means changing the ownership of that property from you to the trust. The specific method of funding your trust depends on the type of assets you are including in your trust.
This additional step is what allows your affairs to be handled after your death without having to go through probate. With a will-based plan, probate will be required except in the case of a modest estate.
Incapacity can be the result of an accident or illness. It may also be temporary or permanent. Regardless of the type or cause of your incapacity, a living trust can allow you to plan for the possibility by identifying someone to manage your finances and medical care through an established trust. Trusts also allow your private affairs to remain private, unlike conservatorship or probate proceedings at the courthouse, which are matters of public record.