Wills & Trusts
Harnessing the Essential Tools Needed to Protect Your Estate
When it comes to drafting an estate plan, the level of complexity will vary from individual to individual depending on each person’s unique circumstances and goals. However, there are two fundamental elements which are typically necessary in order to craft a strong and effective estate plan—a Last Will and Testament and some form of trust.
A Last Will and Testament, commonly just called a “will,” is a simple, effective, and essential way to ensure your assets are passed along according to your wishes. Generally speaking, a will is a document which every adult should complete. Whether you are just starting out in life or you have built a large estate, a will is incredibly important.
So what exactly is it? A will is a legal document that allows you to identify your desires in regards to the distribution of your property as well as other decisions like the hypothetical care of your minor children. Establishing a will is a great way to make sure your wishes are not only known by your loved ones, but properly executed as well. You can make your will simple or quite complex, depending on your specific needs. To ensure everything is covered in your will, speak with an experienced estate planning attorney to help you through the process.
In many cases, a last will and testament alone is not enough to ensure your wishes for the distribution of your estate are adequately carried out. Additionally, there are numerous tax and other financial considerations that go beyond the capabilities of a will, such as a desire to prevent one’s property from passing through probate. When it comes to ensuring flexibility and security for your estate, there are few tools that are more effective than a trust. A trust is a legal vehicle for one’s property, allowing the property owner to create a relationship with a “trustee” who will hold the property “in trust” to be used for the benefit of the named beneficiaries. This can be highly advantageous, depending on your estate goals.
There are two main categories of trusts that you can make during estate planning. Revocable trusts, which ensure you remain in control of all the assets placed within them. Irrevocable trusts offer significant financial protection against taxes and other financial constraints, but you must also give up control of your estate during your lifetime.
Types of Trusts
In addition to choosing the category of trust for your assets, you will also need to choose the specific type of trusts that are right for you. The type of trust you choose will be determined by what assets you are putting in them, and your goals for those assets. Some of the most common options include, but are not limited to:
- Credit Shelter Trusts – These trusts allow you to bequeath assets to your loved ones (up to the amount identified by the estate-tax exemption) tax-free. In addition, the assets placed in this type of trust can grow without being taxed!
- Gun Trusts – Passing guns to a loved one can be a complicated event, and can even cause some legal difficulties for your heirs. If you pass the guns along within a trust, however, your family has much greater protection and flexibility.
- Dynasty Trust – A dynasty trust, also known as a generation skipping trust, allows you to pass a significant amount of money to a loved one who is at least two generations away (typically a grandchild or great grandchild). This money can be passed on tax-free.
- Charitable Trusts – These types of trusts provide you with favorable tax consideration and benefits, allow you to provide funding to meaningful charities, and still maximize the inheritance left to your loved ones.
- Other – There are MANY different types of trusts available to consider. The best way to determine which ones will work best in your situation is to talk with an experienced estate planning attorney.