Will vs. Trusts

There is more than one option in estate planning to transfer your assets to your next of kin. It is important to know what those options are and make the best decision for you and your family. A financial planner can help you define your goals and organize a plan that is right for you.

The two main options to transferring assets is a will or trust. A will is executed upon death and goes through a process called probate. A trust is created when you are alive to protect your estate and transfer the trust to your beneficiaries. Trusts do not go through the probate process making the assets available for distribution to your beneficiaries right away.

A common misconception people have with a will is that they know where their assets will go upon death. That concept is true, but reality can be different.

A will must go through probate where it is submitted to the court, creditors and beneficiaries are notified, while assets undergo a valuation. The typical amount of time for probate can take up to a year. During this process, family members can contest the will if they think they are entitled to assets not left to them. This can slow down the process and can affect the sale price of real property due to market fluctuations.

A trust can be revocable or irrevocable and places the ownership of assets into the trust instead of the individual. A trust is not a public document, and a trustee is appointed by you when it is set up. Any assets, such as real estate property and bank accounts, transferred into the trust are now owned by the trust. If the trust allows the assets to stay inside of the trust upon your death, those assets can be enjoyed by the beneficiaries and not be their asset.

A trust can also protect assets for your beneficiaries if they are married. The assets are not marital property and are not divided as other shared property may be if they divorce.

There are many types of trusts that can be utilized, but the key is always to define your goals and what you are trying to accomplish.

Are you trying to save on taxes, whether personal or estate taxes?

Are you trying to move assets out of your name now in planning for health care reasons?

Are you trying to set up a Legacy Plan to be remembered by multiple generations to come?

This is a simplistic way of describing the differences in preserving your legacy. Kevin Duffy CPA, CFP, CFF can provide you the proper guidance in making these important decisions.