Wills and Trusts
What You Need to Know About Estate Planning - Trusts signatures must be witness by Notary Public.
Wills, trusts, and powers of attorney are all part of an estate plan. Find out why they're important and what happens if you don't have them.
by Jane Haskins, Esq. updated August 16, 2021
Regardless of your assets and net worth, everyone should have an estate plan. Estate planning documents can minimize tax and other consequences for your beneficiaries, avoid a lengthy probate process, name a guardian for your children, help you plan for old age, and make things easier if you ever become unable to manage your own affairs.
A basic estate plan for people of any age includes:
• A will
• Financial powers of attorney
• A living will
• And possibly a trust
Wills, Trusts, and Beneficiaries
Some of your assets can be handed down to your beneficiaries through a will. These are known legally as "probate assets" because they go through the probate process before being distributed to heirs.
But certain types of property are "non-probate assets" that bypass the will and probate and go directly to beneficiaries you have named. This includes assets in a trust, life insurance policies, 401K plans, IRAs, pensions, "payable on death" or "transfer on death" financial assets, and real estate owned as a joint tenant with another person.
Because of this, the process of writing a will should include updating all your beneficiary designations. This will ensure that all your property goes to the people you intended.
Everyone Needs a Will
A will specifies what should happen to your money and property after your passing. A will can also name a guardian to take care of your children. But writing a will can be important even if you're young and single.
If you don't have a will, your probate assets will be passed down according to state law. That usually means your closest relative(s) will inherit everything, and other people you care deeply about—unmarried partners, stepchildren, and best friends, for example—will get nothing. And a court will decide who will care for your children.
An estate planning lawyer can help you with how to make a will and the requirements for signing and storing your will.
Trusts Explained
A trust is a legal document that holds assets. A trustee oversees the trust. Beneficiaries are the people who will receive the assets in the trust.
Distribution of trust assets to beneficiaries happens according to the terms of the trust—without going through the probate process. In addition to the primary beneficiaries, trusts commonly have contingent beneficiaries who will receive the trust assets if the primary beneficiary cannot receive them.
Probate avoidance is a major reason for setting up a trust, but trusts can also help with long-term care planning or provide for children or other family members who need help managing an inheritance. A trust can also help minimize state estate taxes, which often have lower limits than the federal estate tax. All Trusts signatures must be witness by Notary Public.