Estate planning is a task of vital importance. Yet it suffers from being pretty boring. If it were more exciting, everybody would do it as soon as they had a chance or a reason. But as it stands, many people don’t even fully understand the purpose of estate planning or what goes
There is actually a lot that can go into estate planning. That doesn’t mean it has to be complicated; each estate should have whatever it needs as dictated by the particular estate and the goals the individual has for it. But to achieve those goals, we use a few estate planning tools. Two of the most important are wills and trusts.
We’re going to take a deep dive into these tools to get a better sense of how they work. We’ll start by looking at what a will is; then, we’ll explore what a trust is and does. Finally, we’ll have a discussion on which of these tools you should use as a part of your estate planning so you can decide on what steps to take next.
What Is a Will?
A will is a type of document that deals with the distribution of your assets following your death. It is used to designate heirs and beneficiaries. In addition, a will also offers a way to make decisions about your death from beyond the grave. For example, if you want to be cremated, then you could put this into your will to help ensure that your wishes are followed.
If you have children who are minors, then it is highly recommended that you write a will, even if you don’t have many assets or property. This is because a will can be used to appoint guardians for your children. So you may not have anything to leave behind, but you can ensure that your children are looked after should you have the misfortune of passing while they are young.
There is a lot that can be done with a will, beyond even what we mentioned. For example, a will could be used to instruct an executor to create a trust, as well as appoint a trustee. This is often done when dealing with minor children so that the assets they are to inherit are kept safe until they are ready for them.
Everything we’ve just discussed is to deal with a person’s last will and testament. But there is also a type of document called a living will. A living will is also a vitally important part of any good estate plan. While a last will and testament deals with what should happen after you have passed, a living will deals with those things that should happen while you are still alive but unable to communicate them.
Say you fall into a coma. You are unconscious and, therefore, you cannot make any decisions about your own medical treatment. So what happens if your religion doesn’t allow amputation, yet the doctors want to amputate something? Without a living will, you would have to hope that somebody who could speak on your behalf was aware of that fact.
But if you draft a living will, then this would have the final say on medical decisions. You could include information about what procedures you are okay with and which you prohibit. You could also include information about when to take you off of life support. These may be hard to think about at the moment while you are healthy, but doing so can save your loved ones from making a devastatingly hard decision. So a living will is a way of protecting your own interests, as well as looking out for your loved ones.
What Is a Trust?
A trust is a type of legal arrangement that is used to provide some protections to one’s assets, make it easier to transfer those assets to another person, or continue to hold assets for a purpose such as providing the funds necessary for medical treatment without leaving those funds exposed to additional liability risks.
Essentially, a trust functions sort of like another person. If you place your assets into a trust, then those assets are no longer yours; they are the trust’s. In this case, you would be known as the grantor or trustor. The trust would be managed by an individual called a trustee. The terms of the trust, which the trustee is tasked with abiding by, are laid out by the grantor. So any decisions about how to use the assets in the trust will be beholden to what the grantor laid out.
One way to transfer assets to a loved one following your death is through a will. But if you were to use a trust to transfer those funds, then you wouldn’t have to wait until you passed away. Instead, a trust starts to take effect the moment that assets are transferred into it.
There are many different types of trusts, as well as many, many different reasons that an individual may want to use one.
Which Should I Include in my Estate Planning?
Every estate plan should include a will and a living will. Even if you don’t think you have enough assets to worry about, it is a good idea to create these in order to ensure your wishes are followed and so your loved ones know what you would have wanted.
A trust is a trickier subject. They cost money to start and maintain, so many estates may not want to start one. The best way to decide if a trust is right for you is to speak to an attorney.
When Should I Approach an Estate Planning Attorney?
An estate planning attorney can help you with every step of the estate planning process. So the best time to approach them is when you decide it is time to take your estate planning seriously. It’s never too soon to speak to a professional, and it’s never too late to get assistance making sure your plan functions the way you want it to.