Estate Planning: Will & Trust Agreements are Important – Shared Articles

Hello Caton Team Blog Readers –

As Realtors, we are not attorneys and cannot advice you on legal matters; however, the topic of Trusts & Wills pop up often so I am sharing the following article, found on Bankrate.com.

Also, another important document is HEALTHCARE DIRECTIVES I’ve shared an article from The Mayo Clinic HERE!

Please note, always talk to YOUR CPA, Financial Advisory and Trust Attorney with any and all questions. We are sharing these articles as a resource.

For your Real Estate needs, never hesitate to reach out to The Caton Team with any questions and we can point you in the right direction.

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– SHARED ARTICLES BELOW –

Below is shared from bankrate.com – Written by James Royal, Ph.D. & Erin Kennedy contributed to an update of this story.

What is a trust?

You’ve heard of trust fund babies — those enviable young adults who live a worry-free life since they don’t have to earn a living. Just what exactly is a trust fund that provides them an income, and for that matter, what is a trust?

A trust is a vehicle to pass assets to a trustee, who in turn holds those assets — in a trust fund — for a third party, such as a beneficiary. Trusts can be an appealing option if your aim is to minimize taxes, protect assets and avoid the probate process. If you create a trust, you also can control how and to whom those assets will be disbursed. You can choose trustees to carry out your wishes. Many people create trusts to minimize hassle and fees for their loved ones, or to create a legacy of charitable giving.

What is the benefit of a trust?

The primary benefit of a trust is that it allows you to determine where your assets go and when your beneficiaries have access to them. A trust can save your beneficiaries from paying estate taxes and court fees, and can protect your assets from beneficiaries’ creditors or from loss through divorce settlements. It also lets you specify where remaining assets should go in the event of a beneficiary’s death. This can be helpful in a family that includes second marriages and step-children.

Trusts also allow you to pass on assets quickly and privately. By contrast, settling an estate through a traditional will may trigger the probate process, which can take a months or even years and can be a public process. With a trust, much of that delay can be avoided, and the entire process is private. This can save your beneficiaries from unwanted scrutiny or solicitation.

Common types of trusts

There are many types of trusts, and each is structured to accomplish different goals. Here are a few examples of commonly used trusts:

Marital or “A” trusts: Places assets into a trust when one spouse dies; income generated by those assets goes to the surviving spouse, and the principal often goes to the couple’s heirs when the surviving spouse dies.
Credit shelter trusts: These trusts allow both spouses to take full advantage of their estate tax exemptions, which in 2018 is a whopping $11.18 million per person, or $22.36 million per married couple. Assets above this amount are generally subject to a 40 percent estate tax once the second spouse dies. When the exclusion amount is held in a credit shelter trust, the surviving spouse can receive income from the trust’s assets until death, at which point the trust’s beneficiaries receive its assets free of estate taxes. These have become less popular since 2011, when a change in tax law enabled the executor of an estate to elect portability of a deceased spouse’s exemption to the surviving spouse.
Charitable remainder trust: The inverse of the charitable lead trust, in that it allots a given amount of income for beneficiaries and the remainder to specified charities.

Revocable vs. irrevocable trusts

People often think of a trust as an alternative to a will—a way of passing on wealth after one’s death. However, you can also create a trust and pass on assets during your lifetime. A revocable trust, also called a living trust, can be altered and even dissolved so long as you’re alive. It will usually keep your assets out of probate but you probably won’t escape estate taxes.

An irrevocable trust, on the other hand, cannot be altered once it has been created. By creating an irrevocable trust, you give up control of your assets but can protect beneficiaries from probate and estate taxes. Most revocable trusts convert to irrevocable trusts upon the death of the grantor — the person who set up the trust.

Why create a living trust?

You might consider creating a living trust for one of several reasons:

If you would like someone else to accept management responsibility for some or all of your property.
If you have a business and want to ensure it operates smoothly with no interruption of income flow in the event of your death or disability.
If you want to protect your assets from the incompetency or incapacity of yourself or your beneficiaries.
If you wish to minimize the chance that your will may be contested.

Choosing a trust that works for you

When considering a trust, always seek professional advice to make sure you’re making the right decision for yourself and your loved ones. An estate planning attorney or financial advisor can provide you with expert advice about whether a trust could be a useful component in your long-term financial plan.

I read this article at: bankrate.com

What is a will and how does it work?

Below Shared from Bankrate.com

What is a will?

A will is a formal document that outlines your wishes regarding the distribution of your property, possessions and finances upon your death.

This document lets you decide who inherits your belongings, including real estate, vehicles, bank accounts, investments and personal items. A will also allows you to appoint a guardian for minor children and designate an executor, the trusted individual responsible for carrying out the instructions laid out in your will.

“When choosing an executor, make sure to pick someone you trust 100 percent to follow the instructions in your will,” says Jamy Barreau, an estate planning attorney in Port St. Lucie, Florida. “Also, you want to pick someone who will actually qualify to serve under the law. For example, in Florida, a convicted felon cannot serve as a personal representative.”

Barreau adds that it’s equally important to name a successor in case the primary executor in your will doesn’t want to serve or is unable to carry out their duties for whatever reason.

A will covers several important things, including:

Distribution of assets: A will specifies who receives your assets after you die. You can name beneficiaries for individual items or distribute your entire estate according to percentages.
Guardianship of minor children: If you have children under the age of 18, you can designate a guardian in your will to care for them if you and the other parent are no longer alive.
Care of pets: For pet owners, a will can designate a caretaker for your furry companions, ensuring they’re taken care of after you’re gone.
Debt payment: Your will can outline how you want your debts to be settled after your death, including specifying accounts for their payment.
Charitable donations: If you want to make a bequest to charity, a will allows you to specify the nonprofit or organization you’d like to support.

How much does a will cost?

The cost of a will can vary depending on multiple factors. A straightforward estate with minimal assets will generally require a less expensive will compared to a complex one with numerous beneficiaries and property. You can expect to pay about $150-$300 for a simple, do-it-yourself will.

If you enlist the help of an attorney, be aware that legal fees differ by geographic location. It will cost more to draft a will with the help of a lawyer in New York City than it will to create one in rural Indiana.

While creating a simple will yourself is an option, consulting with an estate planning attorney is a smart move to ensure a will is constructed properly. But be aware that hiring an attorney can increase the price of a will by $300 to $500 or more.

Types of wills

There are several types of wills, each with its own advantages and limitations. Here’s a brief overview of some common options.

Simple will: A basic will suitable for individuals with a modest estate and straightforward wishes. It outlines asset distribution and appoints an executor.
Testamentary trust will: This type of will establishes a trust within the document, allowing for more control over how assets are distributed and managed, particularly for beneficiaries who may not be financially responsible with their inheritance.
Holographic will: A handwritten will, typically considered a last resort due to potential legal challenges regarding its validity. It’s crucial to check your state’s specific requirements for holographic wills if you choose this route — the document may not hold up later in probate court.
Joint will: A single will created by two spouses that outlines their combined wishes for asset distribution and appoints guardians for any minor children.

What happens if you die without a will?

Dying without a will, also known as intestacy, can lead to a lengthy and potentially messy legal process.

The state will step in and distribute your assets according to intestacy laws, which may not align with your wishes. In most states, the spouse is the first to inherit assets, then the deceased’s children, and then any surviving immediate family members, such as siblings or parents.

This can cause complications and conflicts among family members.

“Intestate estates tend to be more litigated as heirs fight over who gets what and who should be in charge,” says Sean Williams, a certified financial planner and principal at Cadence Wealth Partners in Concord, North Carolina.

Without a will, the state’s intestacy laws might distribute your assets to unintended beneficiaries, or exclude other family members.

Williams says he’s seen firsthand how family tensions can boil over in these situations. About eight years ago, his wife’s father passed away without a will. Due to intestate laws, all of the man’s assets passed to his second wife, and his adult children received nothing.

“It caused a lot of fighting and has irreparably broken what was already a strained relationship,” recalls Williams.

If you’re a parent, dying without a will could leave your child in legal limbo. The court will determine guardianship of any minor children. While the court will always work in the best interests of the child, it can make a gut-wrenching time even harder.

“Specifying guardianship can help avoid siblings and grandparents fighting over what they believe is the best interest of their nieces, nephews or grandchildren,” says Williams. “It can also appoint a close family friend, outside of immediate family, which might not otherwise be done if left to the courts to decide.”

Your estate may go through probate — a court process that can be time-consuming and expensive — whether you have a will or not. But having a will can streamline the process and make it easier on your family members.

“If everything is documented appropriately in a will under the relevant laws of the state, the estate is typically bound by those terms regardless of how much any particular person, like a family member, may be unhappy with it,” says Barreau.

Will vs. trust: What’s the difference?

While wills and trusts are both estate planning tools, they function differently.

Wills focus on distributing assets after your death, but those assets must still go through probate. Wills are relatively simple to create but offer limited control over how assets are managed after they’re inherited.

Meanwhile, trusts allow you to transfer ownership of assets to a trustee who manages them for the benefit of designated beneficiaries. Trusts can provide more control over asset distribution and, if structured properly, avoid probate. However, trusts are more complicated to create and almost always require help from an attorney to establish.

Choosing between a will and a trust depends on your individual circumstances and the complexity of your estate. Consulting with an estate planning attorney can help you determine the best option for your needs.

How to create a will

Creating a will is a relatively straightforward process, but it’s important to ensure it’s completed correctly so that the document is legally binding.

Here’s a breakdown of the steps involved.

Gather information: Before drafting your will, compile a list of your assets and liabilities, including bank accounts, investments, real estate, vehicles and any debts you owe.
Consider your wishes: Determine who you want to inherit your belongings and in what proportions. Reflect on who you’d like to appoint as your executor and guardian for minor children.
Choose a will format: Decide on the type of will that best suits your needs. Simple wills are readily available online, but consulting with an attorney is recommended for a more complex estate or for unique circumstances.
Draft the will: If you choose to create your own will, ensure it adheres to your state’s legal requirements. Most states require wills to be in writing, signed by the testator (the person creating the will) and witnessed by a certain number of people (typically two).
Sign with witnesses: Once the will is drafted, sign it in the presence of your witnesses. The witnesses should also sign the document, acknowledging their presence during the signing. Make several copies of the will.
Store your will securely: Keep your original will in a safe and secure location, such as a safe deposit box or with a trusted friend or family member. Inform your executor of the will’s location.

Bottom line

A will is an essential estate planning tool that empowers you to make informed decisions about your legacy and assets. It provides peace of mind knowing your loved ones will be cared for and your belongings distributed the way you want. While you can create a simple will on your own, consulting with an estate planning attorney is recommended to ensure it’s valid and complies with state laws.

Shared from Bankrate.com Written by Rachel Christian

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