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FAQs on estate planning and why it is so important

On Behalf of | Mar 9, 2021 | Estate Planning |

Often overlooked and under-appreciated, estate planning remains an essential part of your and your family’s financial well-being. During your lifetime, you may have accumulated modest or significant assets. Regardless, it is a good idea to create an estate plan that may consist of a will or a trust.

Do you want to learn more about estate planning? Well, read this list of some of the most Frequently Asked Questions about this topic:

How is a trust different than a will?

There are key differences. A will comes into play after you die and verified through the probate process. Through instructions from your will, your assets get distributed to your beneficiaries. Wills rely on executors to administer the estate, while trusts enlist trustees. In a will, the testator appoints guardians for minor children. However, this is not allowed in a trust.

Meanwhile, a trust provides you with the chance to manage your estate and assign assets to your beneficiaries while you remain living. Another key component of a trust – as long as it is a revocable trust — is that you may change the terms anytime. There also are two big advantages of having a trust over a will. The first is privacy. A living trust is not a matter of public record. However, a will is part of the public record. Also, with a trust, you avoid probate, a costly and time-consuming process to settle an estate. Wills often go through probate, especially with significantly valuable estates or when an heir contests a will.

What happens if someone dies without having an estate plan?

The state decides what happens with your estate. It carefully reviews your assets, tracks down relatives and potential heirs, then distributes the assets. Ideally, you would rather be the one to make decisions. By creating an estate plan that may include a will or trust, you are firmly in control of what happens to your assets. You can make sure to provide for your children while leaving out your estranged ne’er-do-well brother.

Why do I need a will?

The simplest answer for having a will is to protect your estate and the people you love as well as ensuring that you are in control of these decisions. There are many reasons for having a will. For example, if you are married or cohabitating with someone, you want to ensure that they are taken care of after you die. As a parent, you also want to protect your minor children by naming legal guardians for them if you die. And, if you do not have any heirs, you may bequeath money to charitable causes that are near and dear to you.

Does a trust protect my assets while I am still alive?

Yes. Most trusts are irrevocable. And, in this type of trust — administered by a trustee – you can protect such assets from lawsuits and creditors, while also potentially reducing estate taxes. In addition, if you suffer financial setbacks and file for bankruptcy, irrevocable trust assets are not included in a bankruptcy or other court-related matters.,

Another example is a “spendthrift trust,” which protects and preserves the money you expect to distribute to your heirs and beneficiaries. A spendthrift trust protects the assets from creditors as well as the heirs themselves, who may have poor skills in money managing.

When should I update my estate plan?

Any time a major life event surfaces. A variety of reasons exist as to when to revise your will. They include a marriage, a divorce, the births of children and grandchildren, a home purchase, launching a business, receiving a significant inheritance as well as a move out of state.

It takes time, research, patience and decision-making to create a solid estate plan. By understanding the importance of estate planning, you can let your legacy live on through your heirs and beneficiaries.