Publish Date: December 28, 2021
Is it time to start thinking about writing your will? While there are many ways to leave a legacy of kindness, understanding the differences between a will and a trust may help you make a plan that works best for you.
A will gives instructions to distribute your assets by naming an executor and, when needed, a legal guardian for your children. It goes into effect at death and is subject to probate court. The downside is that it can be costly and lengthy, and a will can be contested.
There are a few simple ways to bypass a will, such as naming beneficiaries. This can be done in retirement accounts, such as an IRA, 401k, life insurance policy, or an annuity. As long as there is a living beneficiary or contingent beneficiaries, such as a person or charity, it will bypass your will and probate. In addition, transfer on death (TOD) is also an efficient way to title an asset, bank account, or an investment account to effectively name a beneficiary without changing ownership.
A revocable living trust differs from a will in that it becomes effective immediately, it’s private, and it avoids probate. A revocable living trust doesn’t change any of the ownership of your asset while you are living, and at death it names a successor trustee. It also allows you to have some flexibility in how and when you distribute assets to your beneficiary. For example, if you’d like your children to inherit assets at certain points in their lifetime (at age 25 or age 30), a trust can do that. It can make special provisions for family members who may have particular needs.
In addition, a revocable living trust can allow you to avoid estate taxes by preserving your estate tax exemption or creating a credit shelter trust. For large estates, a combination of a trust and donating to charity can make a significant impact by saving taxes and leaving a legacy of generosity. Carefully considering all of your options with your financial advisor or estate or tax attorney is important to map out what works best for your situation.
Get In Touch
Springfield MO 65802