For most people, estate planning brings to mind stately mansions with spiral staircases and oceanic views. However, it's time to challenge that mode of thinking. An estate simply refers to what a person owns, and by that definition everyone has an estate.
The reality is if you don't decide what will happen to your estate, your state government will step in and do it for you. In estate planning, your two chief options are a last will and a living trust. This article will cover the differences of both so that you can decide which might be better for you and your family.
What Is a Will?
A will is an opportunity for you to decide who is going to receive your property when you pass away. A will allows you to designate the person that you would like to act as your executor or personal representative to make sure that your instructions are followed.
If you have minor children, a will gives you the ability to designate in whose home those children will be raised if you pass away. However, a will requires that upon your death the inheritance goes to those children. If you'd like instead for the inheritance to be held until your children get older and become more mature, you may need to opt for a living trust.
What Is a Living Trust?
A living trust is a document that allows you to move all of your possession into a trust, which becomes a separate entity. You are the trustee, which means that you have full control.
In addition, you're the beneficiary so all of your property and belongings continue to be available to take care of your needs. When you pass away, the successor trustee that you've named will simply step up and take control of the situation to distribute the property in the manner that you've directed.
There's no time delay or involvement of probate since you've already handled everything up front with your estate planning attorney.
A living trust is a bit more complex than a simple will because a trust often works in tandem with other legal documents to protect you and your estate. For example, a pour-over will is a document that essentially functions as a safety net for your properties.
You should update your living trust annually with any new assets as you acquire them. However, if any assets aren't placed into the living trust, the pour-over will transfers that property into the trust.
A living will is another legal document that typically accompanies the living trust. This document dictates the kind of medical care you want in the event you're medically unable to speak for yourself. A living will is an important element to consider so that you can protect your family members from having disputes regarding your medical wishes.
Additionally, you can appoint medical and financial powers of attorney to detail exactly who can speak for you on medical issues and financial issues in the event that you're unable to take care of those decisions and issues on your own.
Which Should You Choose?
A will is generally a less expensive option in terms of initial costs since less paperwork is involved. It is a much shorter document that might be a good fit for those who don't have young children.
However, a will is handled through probate. Therefore, there is a time delay of several months for your assets to be distributed, and estate taxes will have to be paid.
A living trust is more expensive in initial costs because it requires much more legal paperwork. However, it is speedier, allows you to avoid paying estate taxes, and avoids the probate process.
At Hoffman & Hoffman, we care about preserving your wealth and making sure your loved ones are protected. Contact our experienced estate planning attorneys so we can make sure that your wishes are carried out properly.