Regardless of your age, the amount of money you’ve saved, or the state of your current assets, estate planning is essential. The descendants will highly appreciate a meticulous inheritance plan. It might even preemptively stop a fight that threatens to break the family apart during what would likely be the most inappropriate and sensitive of times. Part of aging gracefully and responsibly, estate planning means looking after your loved ones and ensuring your patriarchal or matriarchal vision for the family lives on no matter what.
Supporting a Legacy: Wills Vs. Trusts
If not for the pleasure of spending, a life of earning money is largely for comfort in your retirement and for the benefit of children and grandchildren. It’s smart to plan well in advance of old age. With investment vehicles that extend their best advantages after a certain age, a paid-off mortgage, and a full portfolio of blue chip stocks and bonds, anyone can retire with confidence. It’s not just these kinds of people who need to think about their estate, however. Even those with little to no savings or low equity in their home should take stock of their situation before the authority they have over their finances dwindles.
A will is not a bad way to provide firm guidance to inheritors, but by no means is it an airtight solution. Wills can be easily contested by those who are not nuclear family members and creating a comprehensive plan for avoiding this type of entanglement requires the services of an experienced lawyer. Even after passing, the chosen executor must take time out of their schedule and immerse themselves in probate until the matter is settled. If they can’t, another pricey lawyer will be needed.
Wills work well in tightly knit families of similar household income levels, as they are unlikely to fight over the dispensation of the estate. For family situations where the outcome is not easily predicted, a trust is the preferred way of handling these sensitive matters.
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Trust in Trusts
For potentially complicated situations, there are a wide array of trusts designed to make the intent of the deceased very clear. Take, for example, the parent who has multiple children who went to raise their own families out-of-state. While many choose to keep a home until they pass on, it can make for a messy fight when one sibling wants to sell at all costs while another (or others) have different opinions.
Many retirees are choosing to live out their golden years in the home they worked so hard to purchase. Others might decide to sell, both to simplify their finances for themselves and for their kids. There are pros and cons to each decision, but while a will can be pushed in either direction, a trust can be used to get the best of both worlds. You can also use a trust to posthumously assert your will (no pun intended) with no room for adjustment.
For family situations where the outcome is not easily predicted, a trust is the preferred way of handling these sensitive matters.
Some of the Best Trusts
The Personal Residence Trust is great for a situation when you want to keep your home in the family, but don’t want to fork over a hefty gift tax for doing so. You can transfer your home from your estate to the trust, make your children the beneficiaries, and then continue living in the house for a set amount of time rent-free. When the property is placed in the trust, its value and the value it accrues over the trust’s term are removed from your estate, so when it changes hands, it does so inexpensively.
This example highlights the benefits of trusts well. While they might be more complicated to set up, transferring assets to a trust drastically reduces the influence that its beneficiaries, the courts, and third parties have on its outcome. They also allow you to exercise much more flexibility over the distribution of your assets. You can leave money to a minor without worrying about sabotage from a greedy adult or executor, create milestones, stipulate conditions your family must fulfill to earn the funds held in the trust, and more.
Charitable trusts are great if you want to give to charity with the money left behind, but also provide a haven from taxes taken out of their estate. There are Special Needs trusts as well, which set aside funds for differently abled family members without disqualifying them from government aid. There is an almost endless amount of trusts that can be arranged, and while they exist for their incontestability and high degree of specificity, they have their downsides too.
For instance, a trust must be maintained over your life and, later on, by a trustee. By design, they are extremely difficult to alter. In some cases, this is a benefit. In others, a disadvantage. By contrast, a will can be changed quite easily (not to mention cheaply) and can do almost anything that a trust can do, though no outcome is guaranteed.
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