When we plan for the future, we tend to think about all the things we will do. How we will take our families on vacations, pay for our kids’ or grandkids’ college tuition, or hand the reins of a business over to a child or other family member. What we don’t often think about—or maybe what we don’t want to think about—is what will happen if for some reason we’re not around to do those things.
It’s a scary thought. It’s a hard thought. But it’s also a necessary thought. Planning for those things today means they can still happen, and happen the way you want, even if you’re not around to personally guide the process. Having a financial plan in place in the event of your death—however and whenever that may occur—is one of the most important things you can do for your family.
At the most basic level, estate planning starts with wills and trusts. Most people have heard the words “will” and “trust” before, but may not know the specific details on how these two things work or how they differ from one another. Here’s a quick (and very basic) primer…
What Is a Will?
A will is a legal document that maps out specifically what you want to have happen to your money, assets, and estate when you leave this world. No matter how much your net worth—whether it’s hundreds, thousands, millions or billions— everyone should have a will . If you don’t have a will, you make things a whole lot harder on your family in the event of your death.
What Is a Trust?
Trusts are also used frequently in estate planning. A trust essentially transfers property or assets to a third party who then ensures they are distributed to your beneficiaries in the way you tell them. Trusts can be created after your death to carry out the wishes of your will, or established while you’re still alive (this is called a “living trust”).
Wills vs. Living Trusts
In some cases, individuals may use living trusts to accomplish some of the same goals as a will (such as leaving specific assets to specific people). There can be advantages to doing this—trusts are private whereas wills are public; trusts tend to work better across multiple states; trusts can generally avoid going through
probate (a judicial process of proving validity)—though living trusts tend to be more costly to put in place and administer than wills.
Whether you choose the living trust depends on your specific needs and situation. One thing is for sure though, everyone should have a plan in place for what happens to your estate in the event of your death. Think ahead to protect your money and your family. Don’t make the mistake of waiting until it’s too late.
Learn more about using wills and living trusts for estate planning by downloading the resource below. If you have any questions or need help creating a plan for your estate, contact our team at Trove Private Wealth™.
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