In an estate plan, you’ll make many decisions on who will inherit from you, who will look after your estate during probation and who will make decisions on your behalf. While that sounds like a lot of choices to make, you know it’s in the best interest of everyone. However, while a will is an important legal document detailing some of the most crucial aspects of how your passing is handled, it does have several drawbacks.
First off, a will can be contested if a family member is determined to have their way and inherit something you believed someone else was more deserving of. Likewise, disinheriting someone could lead to a will challenge. Secondly, it will likely have to go through lengthy probate, and that means it may be some time before your family is justly given their inheritance. Finally, your will may be open to heavy taxation on your beneficiaries.
So how do you avoid these disadvantages? One possible solution is to make a trust. A trust is a legal document that may be more secure in its advantages than a will.
Here’s what you should know:
The basics of a trust
A trust is a lot like a will when it comes to asset distribution. However, a trust has more legal protection and certainty. It works by having the trustor give a trustee the right to manage assets for your beneficiaries.
And, in this way, you may be able to have distinct wishes when it comes to your beneficiary inheriting your assets. For example, your beneficiary may be allotted some assets after they become an adult and more assets if they decide to attend college. As a bonus, your heir can avoid the probate process and reduce taxes.
There are six variations of trusts:
- Living
- Testamentary
- Funded
- Unfunded
- Revocable
- Irrevocable
While you shouldn’t skip out on making your will, you may be considering the advantages of a trust. Trusts are complicated and should be made with a critical eye. You may need to reach out for legal help when planning out your estate.