Estate planning is a complicated process. Often, it’s difficult to determine which steps to take. For instance, when you need to pass along your assets, should you use a will or a trust? Your estate is the totality of your property. Essentially, anyone who owns anything has an estate. Figuring out how to pass along that estate lies at the very heart of which option you need.
Each option has its benefits and drawbacks. When deciding which is right for you, ask yourself the following questions.
What Are Your Family’s Needs?
Wills and trusts pass assets to beneficiaries in unique ways.
A will transfers everything at once. First, your estate must go through probate. This process clears up any of the deceased’s leftover debt, and it officially signs transfers ownership from the deceased to the beneficiary. Probate can be lengthy, but once it’s over, your beneficiaries receive all their assets at once.
A trust acts as a living entity. It can continue to invest, accumulate wealth, and so on. Someone must oversee the trust. This is the trustee. They can distribute assets according to the trust’s wishes right away, or they may have the power to hold off and make decisions on behalf of the trust. This level of power is determined by you, the person who created the trust.
When deciding what your family needs, consider the complexity and size of your estate. If you are a person of average means, a will may work better for you. Your family may need money all at once, and since your estate shouldn’t be too complex, probate should be easy to navigate. Your family can receive the resources they need, using them right away to deal with funeral expenses and rebuild their future.
A trust may be able to distribute finances more quickly, but your family may not need it right away. Trusts generally work for people with bigger estates. The surviving family may be able to manage comfortably for a while, so it won’t be necessary to give them their inheritance all at once. This gives the trust time to grow, granting an even larger inheritance for beneficiaries later.
Work closely with your estate planner, evaluating what your family needs and how long it will take them to receive their wealth.
How Do You Want Your Money Distributed?
Some people may want to control their estate, even after death. A trust allows you to put deadlines and caps on assets. For instance, it can give property to your children once they reach a certain age. It can also put your beneficiaries on an allowance rather than giving them everything at once. You can even put in stipulations, such as giving someone their portion only if they maintain a steady job. Your trustee can also have the power to cut someone off if their spending is frivolous.
A will gives someone their inheritance all at once. Depending on your wishes, that option may be just fine for you as well.
What Is Your Estate’s Growth Potential?
If you have a large estate, you may be able to “future proof” it through a trust. Your trust can grow and manage your wealth, allowing it to pass on to future generations. If large enough, it can sustain full-time trustees, whose only job is managing the trust.
A will closes out your estate. Once all property transfers, the estate no longer exists. This may be a better option for middle-class families.
Benefitting from Both a Will and a Trust
Here’s the good news: You don’t have to pick just one option. You can use both a will and a trust to your advantage. Perhaps you have a large estate with growth potential, but you also have a few items that should go to their recipients right away. In that case, you can use both. Maybe your income and savings are currently modernist, but you own an intellectual property that could grow over time. You can put all your immediate resources into a will but create a trust to manage your IP. There are a variety of ways both a will and a trust can operate together for your benefit.
For help with estate planning, reach out to our firm today. We can offer you a free consultation and help evaluate your needs. You can contact us online or call us at (916) 571-1550.
