Blog

MAKING SENSE OF LIVING TRUSTS AND WILLS

Making Sense of Living Trusts and Wills

MAKING SENSE OF LIVING TRUSTS AND WILLS

What’s the best option for you when looking to transfer your estate to your heirs?

AS YOU LOOK TO PROTECT YOUR ASSETS AND PASS THEM TO SUBSEQUENT GENERATIONS, ESTATE PLANNING TOOLS ARE
ESSENTIAL. AND WHILE LIVING TRUSTS AND WILLS BOTH HELP ACCOMPLISH THE TASK, THERE ARE IMPORTANT DISTINCTIONS THAT YOU SHOULD UNDERSTAND BEFORE CHOOSING ONE OVER THE OTHER (OR IF CHOOSING BOTH).

When deciding which instrument(s) to choose, you should seek the counsel of a financial professional who specializes in tax, investment, and legal advice.

Some terminology

A will is a legal document that expresses the wishes of a deceased person. Those wishes can include guardianship matters and how cash or material objects are distributed. Its provisions take effect only after the person who made the will dies.

A trust, on the other hand, is active once you create it, and the grantor can specify how assets are distributed before their death. There are two main types of trusts: An irrevocable trust is a fixed document and cannot be changed; and a living trust can be changed after it is created.

When you create a trust, you designate a trustee who holds title to the assets that benefit a third party. Because of the trustee relationship, a trust is typically more expensive to draw up and manage than a will.

About wills

A will is an integral component of estate planning; as such, an attorney may be helpful in considering the various legal and tax implications when creating and administering a will.

A will may contain the following: assets, debts, location and contents of safe deposit boxes, vehicles, and real property. The maker of the will can designate that family, friends, and/or charities receive their possessions.

When the maker of a will dies, it goes through probate court. The process can be expensive as it typically involves a probate attorney (with the exception of life insurance policies and retirement accounts, which avoid probate).

Those with minor children should appoint a guardianship of their children in a will. Otherwise, the surviving family members will have to go to probate court to get one appointed. That person may not be the one you wanted to care for your kids.

If you die without a will, the laws of your state will determine who receives your assets. Depending on their value and parties involved, it can be a long, legal process to distribute them. Therefore, a will can help protect your survivors against unwanted tax liability.

About trusts

Trusts are created for a variety of reasons. A living trust that is revocable can be altered during the lifetime of the trustor. When that person dies, the trust becomes operational. However, unlike a will, a living trust passes property outside of
probate court, avoiding attorney fees. Your named beneficiaries receive the property immediately.

In a testamentary trust, the named trustee controls the passing of the trustor’s estate once they die.

Summary of differences

While both wills and trusts are important estate planning tools, they differ in significant ways:

  • Activation: A trust is activated once the trustor signs in. A will does not take effect until the testator dies.
  • Probate: A will must pass through probate court, while a trust does not.
  • Guardianship: A will designates guardianship, whereas a trust does not.
  • Legal challenges: A will can be challenged in court by the designated beneficiaries as well as those not designated as beneficiaries. A trust usually cannot be challenged.
  • Modifiable: A will can be revised, and a trust can be revised if it is a revocable trust.

Because both wills and trusts are important estate planning tools, consider developing them early in life. That will make sure that your affairs are handled in the manner of your choosing, rather than a court’s.

 
 

Thanks for checking out the blog. 

Joe Breslin , CFP®

 


This material is for general information only and is not intended to provide specific advice or recommendations for any
individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive
outcomes. Investing involves risks including possible loss of principal.
This material was prepared by LPL Financial.   Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and
broker-dealer (member FINRA/SIPC). 
Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL Financial affiliate, please note LPL Financial makes no representation with respect to such entity.

 

Securities and insurance offered through LPL or its affiliates are:

 

Share This Article

Facebook
Twitter
LinkedIn

You May Also Like

Merging Your Money When You Marry

Getting married is exciting, but it brings many challenges. One such challenge that you and your spouse will have to face is how to merge your finances. Planning carefully and communicating clearly are important, because the financial decisions that you make now can have a lasting impact on your future.

Read More »

Caring for Your Aging Parents

Caring for your aging parents is something you hope you can handle when the time comes, but it’s the last thing you want to think about. Whether the time is now or somewhere down the road, there are steps that you can take to make your life (and theirs) a little easier.

Read More »

Am I Having Enough Withheld?

If you fail to estimate your federal income tax withholding properly, it may cost you in a variety of ways. If you receive an income tax refund, it essentially means that you provided the IRS with an interest-free loan during the year. By comparison, if you owe taxes when you file your return, you may have to scramble for cash at tax time — and possibly owe interest and penalties to the IRS as well.

Read More »

Facing the Possibility of Incapacity

Incapacity means that you are either mentally or physically unable to take care of yourself or your day-to-day affairs. Incapacity can result from serious physical injury, mental or physical illness, advancing age, and alcohol or drug abuse.

Read More »

Trust Basics

Whether you’re seeking to manage your own assets, control how your assets are distributed after your death, or plan for incapacity, trusts can help you accomplish your estate planning goals.

Read More »

Asset Protection in Estate Planning

You’re beginning to accumulate substantial wealth, but you worry about protecting it from future potential creditors. Whether your concern is for your personal assets or your business, various tools exist to keep your property safe from tax collectors, accident victims, health-care providers, credit card issuers, business creditors, and creditors of others.

Read More »

Don't Miss Anything

Stay up to date with our monthly newsletter.