Wills and Trusts
A will or trust is the foundation for estate planning. Which one is right for you depends on your situation, and you should seek advice from professional advisors (tax, investment, and legal). The purpose of these documents focuses on your estate transfer plan. If you do not have either of these documents, the state you live in and the federal government will handle the transferring of your estate.
Wills
The most common type of estate transfer document is a will. A will is a legally enforceable document that states how you want your affairs handled and your assets distributed. A will becomes active after one’s death. A will can include a list of assets and liabilities and personal property as well as how you would like these items transferred and to whom. If you have minor-aged children, you should include in your will who your children’s guardian would be.
If you do not have a will at the time of your death, any assets where you have not identified a beneficiary will need to go through probate court. Also, if you have not identified a guardian for your children, probate court will also appoint a person to care for your kids.
It should be noted that retirement accounts and life insurance policies that have beneficiaries identified will not go through probate court.
Trusts
A trust is a legal relationship that allows a third party, called a trustee, authority to handle your assets for the benefit of a third party. There are many types of trusts, but for estate transfer we will focus on a revocable living trust.
A revocable living trust is created while the property owner is alive, and it is revocable or can be changed while the property owner is alive. The property owner maintains ownership of the property while he or she is alive. The trust is activated once the owner of the trust signs the documents.
Which One is Right for You
A will and trust are different, and there is a possibility you may need both. If you have minor children, a trust does not name a guardian for the children, so you will still need to have a will to have this done.
Setting up a trust is more costly and can be more complex than a will. There are online tools available to help you with creating a will, while an attorney is needed to establish a trust.
No matter which route you go, it is most important to have one or both of these documents now vs. later in life. These documents are part of the estate planning process, and either of these will ensure that your assets and children end up where you want them to go.
If you currently do not have a will or trust, feel free to reach out to me at mike.rebischke@lpl.com, and I will help you begin the process.