The basic purpose of estate planning is to prepare for the possibility of incapacity and for death. Your estate plan can include various types of estate planning tools, including trusts and wills. The variety of estate planning strategies that are available allows you to customize a comprehensive estate plan to fit your needs. This article will explain what experienced estate planning attorneys know about trusts and wills.
Everyone can use a will or trust, not just the wealthy
Many clients believe that only elderly people or people with a lot of money need to be concerned about creating a will or trust. That’s not the case, actually. In reality, anyone who owns any property has an estate and, as such, should at least have a will or trust. This is true regardless of their financial status. Even if you think you don’t have enough assets to be concerned, remember that your estate includes your bank accounts, retirement accounts, life insurance policies, and real estate. Many of your possessions can be 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 on their own. Creating a will or trust is the easiest way to do just that.
Your estate includes more than just money and real property
Trusts and wills can also be used by those who only have a few possessions. That means, even if you do not own a home or vehicle, you should still consider creating a will or a trust. The majority of clients forget about the personal possessions they have that are worth more in sentimental value than anything else. For example, you need to make decisions about who should receive certain family heirlooms such as your wedding ring or your family photos. However, if you die without a will or a trust, a judge will make all of these decisions for you.
A trust serves as more than a tax shelter for the rich
It is a common misconception that trusts are basically tax shelters for rich people. Though it is true that a trust can have many tax benefits, trusts are more often used to ensure that families will have the financial resources they need in the future. Trusts can also be used to help your family avoid probate which can save time and money in many cases. A trust can also prevent the need for a conservatorship, which would otherwise be necessary if you become incapacitated.
Why you should use a trust to plan for incapacity
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 that 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 the probate process, which is a matter of public record.
A will allows you to have a say in who will take care of my child if I die
Unfortunately, too many people believe that, if they die, someone will step right in and take care of their child. That is not always the case. The fact is, if you do not address this particular issue in your estate planning, then a judge will make the ultimate decision about who will raise your child. Regrettably, a judge may not share your family values or religious beliefs and will not know which of your relatives will take those views into consideration when raising your child. On the other hand, if you have a will that names a guardian for your children, you can play a part in a decision that will affect your child’s future.
When you should update your will or trust
After your will or trust has been created, your estate planning is not necessarily complete. With a will or trust, it is just as important to keep it updated. According to experienced estate planning attorneys, if you get married, divorced, have a child or one of your heirs dies, you may need to change the terms of your will or trust. A will can be modified at any time during your lifetime.
You cannot forget to fund your trust
After your trust has been created, there is one more very important step. All of the property or assets that you intend to be controlled by the trust must actually be transferred to the 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. If you have questions, discuss it with us.
If you have questions regarding trusts and wills, or any other estate planning needs, contact the Northern California Center for Estate Planning and Elder Law for a consultation, either online or by calling us at (916) 437-3500.
- What to Consider When Choosing an Executor or Successor Trustee - January 28, 2022
- The Top Three Other Documents Your Estate Plan Should Include - January 26, 2022
- Are Pay on Death (POD) Accounts a Good Idea? - January 24, 2022