Financial planning and wealth management are important parts of any successful life. Whether you are managing the bounty of a long career, taking good care of your inheritance, found success in the stock market, or some combination of the three, managing your assets is not just something you do for fun. It’s a responsibility to keep your wealth, self, and family secure.
While managing your wealth today may be a matter of finding new promising investments and ensuring the security of your current assets, planning to pass that wealth on to the next generation and/or your named heirs is also an important part of your responsibility. Whether this inevitable hand-off happens decades from now after a long rewarding retirement or in the near future due to a freak meteor shower, naturally you will want your family to face the least hassle, have access to any funds and property they need to live, and face as few delays or fees as possible.
Choosing a Living Trust vs a Will
Wills are the standard way to pass on wealth, property, and final wishes to your surviving loved ones and inheritors. While wills may be the tradition, there are also some pretty well-known drawbacks like probate. Probate can leave people who depended on you unable to access funds for months after the will has been read; sometimes this can even take years. The more practical option for anyone with significant wealth to pass down is to build a living trust instead.
A living trust has the vast majority of the powers that a will does in terms of enacting your wishes; rather than following traditional courses of estate distribution, you have much more control over what happens immediately after your departure. You will still be able to designate the executor who in this case will be a trustee. You’ll be able to determine who will gain custody of any minor children. And you can pay your debts. But the benefits of a living trust are numerous. Let’s take a look.
Benefits of a Living Trust
1) No Probate
Probate is the judicial process of proving your will is genuine, accepting it in court, and then executing your final wishes. However, this is not an efficient process. During this time, the court holds possession of your estate, not your family. Some families wait months, if not years, for probate to settle; during that time they have zero access to the things willed to them. This can be property, bank accounts, vehicles, and even wealth-bearing accounts that need to be managed.
A living trust, on the other hand, preemptively puts all your assets into the possession of a trust that you control as the leading trustee. When you die, the trustee becomes either your spouse (joint living trusts) or your named successor trustee. They are essentially your executor and will be responsible for taking items out of the trust to give to family, friends, and previous business partners. There’s no delay because there’s no will to probate; the trust is not officially part of your estate.
2) No Probate Court Fees
Not only does probate keep possession of inherited wealth from surviving family members, it also comes with costs that are taken directly from your estate, diminishing the amount that can be passed on. If there are any complications in enacting your will or disputes of the will terms, probate fees go up (as do delays) and more is taken.
Living trusts take longer to set up than wills but in that crucial moment when its time to pass on inheritance, there is no hassle. Even disputes can be handled internally without involving the court or triggering unnecessary fees.
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