Estate planning can be confusing. There are so many options for what you can do, and each of those has a myriad of options within them. When trying to decide what happens to your assets after death, it can be hard to determine the best route.
You have two major options for distributing your property after death: a will and a trust. Each has its advantages and disadvantages. Knowing which is best for you relies on learning how each functions. We will go into greater detail throughout this article, but here are the basics.
With a will, you make specific determinations. You can give any piece of property to any individual. A trust operates as a separate entity. It can continue to grow and make investments, increasing the assets for your beneficiaries.
Choosing with is best for you depends on your needs and the needs of your beneficiaries. In this article, we will present you will several factors to consider, showing you how each will operate within those parameters.
The Size of Your Estate
People are sometimes confused by the term “estate.” It often conjures up images of vast property belonging to wealthy people. Estates are not exclusive to the rich. Anyone who owns property that must be handled after death has an estate.
When choosing between a will or a trust, consider how big your estate is. Many average Americans can benefit by using a will. Wills are designed to distribute your property all at once, in a big chunk. A middle-class family would likely benefit from this. Adjusting to your absence could be financially difficult. Receiving all the inheritance can help people get back on their feet, moving forward.
For larger estates, a trust may be the better option. If you are living comfortably, your family might be able to manage without receiving their inheritance right away. With a trust, you can put beneficiaries on a scheduled allowance. This allows the trust to continue to grow and accumulate wealth, helping create a stable future for your descendants long after your passing.
Your Specific Beneficiaries
When deciding how to distribute your assets, it’s important to consider who receives what. For example, for a sentimental item that passes a close friend, a trust may be too involved. Using a will, you can simply pass items along to those who need them.
You may also wish to consider the individuals receiving your property and their personalities. It’s not always comfortable to think of your beneficiaries this way, but it helps you make wise decisions. Imagine you have two loved ones, both of whom deserve to split your estate. One is frugal, industrious, and entrepreneurial. The other is a dreamer who often loses money in get-rich-quick schemes.
Using a trust, you can manage how your inheritors receive their portion. You can give one person all their money at once and dole money out to another over time. You can build in stipulations, such as making sure one beneficiary grows their portion before receiving more.
A trust even allows you to give someone control over the estate, a trustee. This person can distribute money how they see fit. They can cut someone off if they are squandering their money, or they can help them learn how to control their finances before receiving more. You can have a single trustee or a board of trustees. They can even pay themselves through the estate and make managing it their full-time job. Ultimately, a trust gives you greater control over your estate, even after you are gone.
Family Considerations Beyond Property
A will can help you care for the children. You can name their guardians if tragedy strikes. Without explicit instructions, the state will decide what happens to the kids. It will probably leave them with a close relative, such as your sibling or parents. There is, however, always the possibility that they will be left with a professional guardian they don’t know. The children could even be separated, left with different caretakers.
Even close family could be a bad choice for your children. In today’s world, people are more willing to separate from toxic relationships, including those with their family. “Blood is thicker than water” is no longer true. Perhaps you have a close friend that helped raise the children since birth, and you know they are a better fit as a guardian. A will can bypass internal fighting and confusion, leaving the kids with the most deserving person.
Using Both
Even if you choose a trust, using a combination of both a will and a trust is best in most situations. A will can manage the transfer of specific items to specific people, and a trust continues to manage the estate as an entity. A will can ensure your children go to the appropriate caretakers, and a trust can manage their inheritance until they are 18.
Talk to an Attorney
As you can see, there are many choices to make when planning your estate. Meet with an attorney and tell them about your current financial situation and your wishes for the future. They can help you craft a plan that is right for you and your family
For help with estate planning, contact our firm for a free consolation. Our number is (937) 403-9033, and you can reach us online.