Women 50+ have unique concerns when it comes to planning for the rest of their lives.
They worry about:
Financial security not only for themselves but also their families when they are gone.
How much they should leave for children, grandchildren, or other loved ones and how their decision to distribute assets will be received.
Long-term care and healthcare costs since they have longer life expectancies.
Minimizing estate taxes.
Choosing the right people to be the executor or trustee.
Whether they should have a Will-Based Estate Plan or a Trust-Based Estate Plan.
Since October is Estate Planning Awareness Month, I decided to address the last concern regarding which estate plan is better for your situation. There isn't a one size fits all solution, it really comes down to what you need. I’ll briefly explain each of them.
Will-Based Estate Plan:
Imagine your will as a set of instructions for what should happen with your stuff and assets when you pass away. Here's how it works:
Asset Distribution: In your will, you list out who should inherit your belongings, like your home, money, jewelry, and other valuable items. You can also specify how much each person should get.
Probate Process: After you pass away, your will goes through a legal process called probate. This process can be time-consuming and may involve court fees. During probate, your wishes are reviewed by a judge to make sure they are followed correctly.
Public Record: Wills are usually made public, so anyone can see what you've left to whom. Some people prefer more privacy when it comes to their estate.
In creating the will-based estate plan, these are the documents that are important to have:
Last Will and Testament
General Durable Power of Attorney
Advance Directive for Medical/Surgical Treatment (Living Will)
List of Tangible Personal Property
Trust-Based Estate Plan:
Now, let's talk about the trust-based estate plan. Think of a trust as a special container where you put your assets:
Asset Management: With a trust, you transfer your assets into it while you're still alive. You appoint someone, called a trustee, to manage and distribute these assets according to your wishes.
Avoiding Probate: Since your assets are already in the trust, they usually don't have to go through probate when you pass away. This means quicker access for your loved ones and potentially less cost in legal fees.
Privacy: Trusts are typically private documents, so your asset distribution remains confidential. This can be important if you prefer to keep your financial affairs more discreet.
The documents included for a basic revocable trust* might be:
Declaration of Trust-which lays out provisions for management, control, and distribution of your assets during life and after death.
Certification of Trust-The summary of key provisions from the trust without revealing other personal details. This is often given to third parties in place of a copy of the actual trust.
Schedule of Assets: Lists what you hold in the trust and are subject to the provisions of the trust.
The main difference is that a will tells what happens to your stuff after you're gone and goes through a public process called probate. A trust is like a container that holds your assets while you're alive and can help you avoid probate and keep things private.
If you’re still not sure which is for you, here is a quick little quiz to help you determine which is better for your situation from Trust & Will, a company I partner with often.
Deciding between the two often depends on your specific circumstances and preferences. If you’d like to talk about it with me, I’d be happy to answer general questions. Any legal advice will come from attorneys at Trust & Wills.
*There are more types of trusts out there that serve different purposes for clients. I did not want to make this more complicated so just described a basic revocable trust.
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