A will is an essential legal tool for detailing how you want your assets to be distributed after death. Importantly, through a will, you also name a guardian for minor children. It’s wise to go a step further than a will, however, and establish a trust to be used in tandem with your will. Unlike a will, a trust can help with asset management during your lifetime, and also facilitate swift and private distribution of assets upon your death. Read on to understand how wills and trusts best work together to create a solid estate plan.
Clear and Complete: Life and Death
Making a will remains key to leaving your affairs in order when you die, and thus hopefully spares loved ones from needless stress and conflict over your assets and wishes. At Investopedia, Lisa Smith offers this simple explanation of the purpose of a will:
A will is a legal document that specifies your wishes regarding the distribution of your property and assets and the care of any dependents after your death. Without a will, your estate may not be distributed according to your preferences, and your loved ones could face added stress, time, and costs in settling your affairs. While no document can cover every potential issue that arises after death, a last will and testament comes close, allowing you to outline your instructions for your property and the care of your loved ones.
With longer lives becoming a reality for more people, trusts are an additional, and important component of a complete estate plan. While the terms of a will only pertain to plans for assets upon death, a trust, such as a revocable trust, can help us manage assets during our own lifetimes, and also organize them for distribution upon death. For example, the terms of a trust can be set up to ensure assets are available for own care, as we age. A trustee can even be designated to safeguard and allocate assets from the trust to address our needs in the event of a capacity decline. Assets that remain in a trust upon our death, are distributed to the named beneficiaries of the trust, and by-pass probate, so they are typically available more quickly and privately than assets left in a will, which must go through the public process of probate. TIAA shares this summation of why a trust is an important complement to a will in a complete estate plan:
A revocable (or “living”) trust is a legal document that manages property distribution both during your lifetime and after death. It’s active as soon as it’s created and funded. Its key advantages include:
- Bypassing the probate process
- Helping navigate complex family dynamics
- Addressing unique financial considerations
- Easing the burden on loved ones during an emotional time
In addition to the more basic revocable trust, there are also many other types of specialized trusts to address more nuanced and complex wealth transfer and tax planning goals….While a trust typically offers benefits that outweigh its higher initial setup costs, it doesn’t eliminate the need for a will, which remains necessary for estate settlement and serves as a backup for any assets not held in the trust.
Fiduciaries and Bonds for Your Estate Plan
When creating a will and trust, pay close attention to the designation of loved ones, friends or professionals who you designate to serve as your fiduciaries: they are ultimately responsible for the successful administration of your estate plan. When a will is made, this person is typically referred to as an executor. When a trust is established, the fiduciary is typically referred to as a trustee. Regardless of the specifics of your estate plan, the fiduciaries you appoint have a legal responsibility to carry out your affairs, in accordance with the intentions set forth in your estate planning documents and the law. When representatives are designated, fiduciary bonds, alternatively referred to as executor, trustee, or estate bonds, can be required as a safeguard for the interests of your estate and beneficiaries. Essentially, fiduciary bonds serve as a guarantee that your designees will adhere to your plans. As a leading national provider of all types of fiduciary bonds, Colonial Surety Company makes it easy to obtain all types of fiduciary bonds: simply get a quote online, fill out the information, enter a payment method, and download your digital estate bond.
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Good To Know: Settling An Estate?
Even when the affairs of a deceased loved one have been left fairly well organized, executors and trustees are likely to find themselves with quite a lot to do, at an especially stressful time in life. Though plenty of fiduciary responsibilities loom, take a breath, and take heart with this kind reminder from TIAA:
In the wake of losing a loved one, confusion often mingles with grief, leaving families wondering what steps to take first. Despite what many think, there’s no need to rush into financial decisions or paperwork when someone passes. In fact, estate professionals consistently advise against it. The financial paperwork, bank accounts and legal matters can wait. Most estate decisions can be put on the backburner for several days or even weeks before being addressed. What’s advised in the wake of a loss? Spending time with loved ones, making funeral arrangements and taking the necessary time to grieve.
Estate Law?
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