Will and trusts are two methods by which you can distribute your assets to your heirs. While a legal will — also known as a last will and testament — is usually the default option, there can be big advantages to placing your assets in a trust. Let’s take a look at the differences between the two.
Your will has a few important purposes. First, it allows you to list your assets and specify how you’d like them distributed. You also name an executor — the person with the legal right to carry out your final wishes. Finally, you’ll designate a new guardian for your children in the event of your death.
The downside of distributing assets via will is that a will is subject to a legal process called probate. When your assets are tied up in probate, it’s likely that your family won’t have access until the case is complete. This can result in delayed inheritances and unpaid bills.
In lieu of using a will, you can place your assets in a living trust. In this trust, you’ll specify how you’d like these assets handled in the event of your death — as you would in a will. You’ll also designate a trustee; this is the person you’d like to manage the trust upon your passing. This person will also be responsible for distributing the assets in accordance with your wishes.
In many ways, a living trust is more flexible than a will. For example, a trust enables you to withhold distributions to your heirs until they reach a certain age. It’s also not subject to the probate process, which means the money in the trust can be accessed immediately.
While you can choose how and when your assets are distributed to your children, a living trust doesn’t allow you to name a guardian. For this reason, it’s often used in conjunction with a last will and testament.
Another document you should have in your estate plan is a living will, also known as an advanced directive. This is often confused with a last will and testament, but a living will is different.
Your living will is a document that specifies how you’d like your health care handled in the event you become incapacitated. Here are a few instructions you’ll want to include:
- Do not resuscitate order — In the event that you stop breathing or that your heart stops beating, you need to determine whether or not you’d like the doctor to try to revive you.
- Breathing and feeding tubes — If you’re in a vegetative state, health care workers need to know whether they should extend your life with measures such as breathing and feeding tubes.
- Pain management — This section will detail how and when you would like pain medication to be administered.
Financial Power of Attorney
It’s important to name a financial power of attorney in your estate plan. The person you designate will make financial decisions on your behalf if you’re unable to make them on your own.
In addition to any assets you’ve listed in your will, bank accounts and retirement funds allow you to name beneficiaries. People often forget to do this, so while you plan for your estate’s future, check to make sure your beneficiary designations are accurate and up to date. The benefit of naming beneficiaries for individual funds is that your heirs won’t have to go through the probate process to receive their inheritances.
Estate planning isn’t just for wealthy families. Everyone can benefit from creating an estate plan. Contact SW Smyth LLP for a consultation with one of our experienced attorneys.