You have worked your whole life to accrue assets, like your home, retirement savings, vehicle, and more. That is why proper estate planning is so important. A solid estate plan preserves your assets and also ensures your family members receive the proceeds to ensure their financial stability after you are gone.
In addition to a will, which is an essential aspect of an estate plan, you may also benefit from a trust. Trusts are often used in conjunction with wills, and despite popular sentiment, are not only useful to the very wealthy.
The difference between wills and trusts
A will is a legal document that lists and distributes your assets after your death. Most wills are probated, which is the process of proving its validity. While trusts also dictate how you would like your assets to be handled after you are gone, they provide a lot more flexibility than a will does.
A trust allows you to put stipulations on the way your assets are dispersed. For example, you can state that the recipient must be a certain age or must complete college studies in order to earn their share of your estate. You can also establish a schedule for assets to be dispersed, as opposed to providing them in one lump sum.
There are two types of trusts. An irrevocable trust cannot be changed once it is established, meaning your assets are no longer in your control. Because you are no longer the owner of these assets, you will not be taxed for them, which is beneficial to people with estates of great value. Conversely, a revocable trust can be changed after it is established.
How a trust can benefit you
Unlike wills, trusts are not subject to probate. This will save you time as well as money, as probate can become quite expensive if you have a complex estate. Trusts are also private, unlike wills. Wills become part of the public record, but only the trustee and beneficiaries will know the details of the trust. In addition to decreased taxes, irrevocable trusts also safeguard the beneficiary of the funds, as they won’t be subject to lawsuits or divorce settlements because they are not actually owned by the recipient.