Trust or Will

In full disclosure, I am not a lawyer or advisor and I am not recommending obtaining a Trust or Will. I am sharing information I learned while setting up my trust. Contact an Estate Attorney before making any decisions.

My husband and I set up a trust to avoid the probate process and to secure the well-being of our loved ones.

I have one child, and my husband has a child from a previous marriage. We wanted to set up clear directions for a trusted person to manage our affairs if we become incapable of taking care of ourselves or once we pass away.

A friend’s mother owned a home worth $320,000, two paid cars, and numerous designer items. She established a will to distribute her assets among her children, friends, and cousins according to her wishes.

Due to the strict guidelines in place for her insurance policy and her 401(k), they could not be contested.

However, the home, cars, and designer items were contentious and went into probate for seven months, resulting in a decrease in the total value of the assets due to the fees.

Note: Probate is a legal process for settling the estate, validating the will, and appraising the assets.

An estate is everything you own, including cars, checking and savings accounts, real estate, life insurance policies, and furniture.

What is Estate planning? It involves managing a person’s estate and deciding how assets such as property and finances will be disbursed. Wills, trusts, powers of attorney, and advanced healthcare directives are put in place to reduce the likelihood of family disputes after a loved one’s death.

I will review three kinds of trust that fulfill different roles and advantages. Understanding your specific needs and options when deciding between a Trust, a Will, or both will significantly affect the outcome.

A few key terms to be familiar with when it comes to a trust:

• Trustor, grantor – creates the trust.
• Trustee – person or persons responsible for managing the trust.
• Beneficiary – the one(s) who benefit from the trust outlined in the document.
• Grantee – receives the assets.

Note: A trustee plays a crucial role in ensuring that an individual’s assets are managed and distributed strictly to their wishes after they pass.

A Trust is a legal document that assists with the following:

• A trust can facilitate a smooth transfer of assets and avoid probate by providing relief and security.
• Protect assets from creditors and minimize estate taxes, such as the Illinois $4 million threshold.
• Provides a solid financial base for loved ones and offers peace of mind.
• Determines the distribution/allocation of the intended use of the funds.
• A trustee, whether a person or an organization, holds assets for one or more beneficiaries. Understanding this role can empower you in your estate planning decisions.
• Manages and distributes assets by the terms in the trust document.

The different types of trust are as follows:

Revocable Trust/living trust: This type of trust can be changed, modified, or revoked by the grantor who created it. It provides the grantor flexibility over the trust and the ability to make changes as needed.

Once an irrevocable trust is established, the grantor cannot alter or revoke it because it stands as a permanent testament to the grantor’s intentions. Once in this trust, the assets become separate from the grantor’s estate. The key feature of this trust is that it minimizes estate taxes because once assets are transferred, they are no longer considered part of the grantor’s estate, which helps reduce the estate’s value.

Testamentary Trust is created within a will and takes effect only upon the death of the person who made the will. They allow for the distribution of assets according to the instructions laid out in the will.

Note: I will not cover other trusts, such as Special Needs Trusts, Charitable Trusts, Spendthrift trusts, etc.

Before speaking with an estate attorney,

• Consider the name(s) and contact information of an appointed executor/trustee to manage the trust.
• List all assets, liabilities, real estate, investments, bank accounts, and debts.
• Have the names of beneficiaries and their relationship to the estate.

This information will assist with determining the type of trust that will benefit your needs.

A few Disadvantages of a trust are as follows:

• The cost can run from 1,000 to 5,000, depending on the complexity of the trust, the legal fees, and the assets involved. It is important to consult with legal professionals to get an accurate amount.
• The trust can be a public record.

Note: a trust offers more flexibility than a will.

A Will, also known as a last will and testament, is a legal document that assists with the following:

• The distribution of assets and property after death.
• Names guardians for minor children and specify other wishes, such as funeral arrangements.
• Allows provision of specific items for family and friends.
• Makes it easier on the surviving persons and eliminates disputes about who gets what.
• Undergoes the probate procedure.
• Expresses one’s desired distribution of assets and property after death.
• Leaves guidelines for the care of any dependents.
• Designates an executor (who handles the terms of the will through the probate process) to fulfill the wishes outlined in the will.

A few key terms to be familiar with when it comes to a will:

•  A testator is a person who passes on their assets.
• The beneficiary receives and benefits from the terms of the will.
• The executor is responsible for ensuring that the beneficiary gets the assets intended.

In most states, the testator, the person who initiates the transfer of assets, must sign the will before two witnesses.

Drafting a will becomes more complex with businesses, properties in multiple states, liabilities, disputes, etc.

I hope this information is informative and beneficial.

Thanks again for tuning in and sharing your thoughts. If additional information is needed, please reach out.