Estate planning attorneys regularly receive inquiries from potential clients asking how much a ‘simple will’ costs.
Having a will is a good thing, but it also has its limitations. A will is not enough to ensure that your assets will be distributed in a controlled manner, nor will it keep your family out of the lengthy court process that is probate. And because of the probate process, a will won’t provide immediate support for family members who need it.
To guarantee that your assets will be distributed to your loved ones according to your wishes, you need to have an estate plan in place. A will is an important part of that plan, but there are other tools available to make sure your wishes are carried out and that your estate isn’t depleted.
Wills Vs. Trusts – What to Know About Each Vehicle and When You Need Them
Wills
A will is a legal document used to communicate who you want to receive the benefit of your assets once you have passed away. It also designates who you want to oversee distributing those assets.
Wills also have some significant limitations. They don’t stop you from going through probate. A will isn’t enough to keep your family out of court because a will is required to be probated.
One misconception people have about a will is that you don’t have to spend much time or money on the probate process. Probate often takes a minimum of 6 months. It’s also a costly process that can reduce the size of your estate.
Trusts
Unlike a will, which is a document between yourself and the court, a trust behaves more like a contract between you and the trustee you designate to execute it. The main benefit of a trust is that the assets placed in a trust avoid the probate process.
Trusts are an essential part of estate planning in that they can protect high-value assets from probate as well as estate taxes. They also offer the flexibility to give the trustee specific instructions about how to distribute those assets, especially when leaving assets to minor children.
Many families are unaware of trusts being an option because they’re uninformed of the total value of their assets and feel that a trust isn’t an option for them. Also, the attorney they use to draw up their will may be unfamiliar with setting up trusts
Wills do not avoid probate
A will is just a suggestion of your wishes and must be validated by a judge through a process known as probate.
Simple Wills Provide Almost No Protection for Your Beneficiaries
A thorough estate planning can protect your beneficiary’s inheritance from a variety of risks, including financial irresponsibility, divorce, lawsuits and creditors, unnecessary taxes, nursing home expenses, and more. However, these protections are rarely included in “simple” wills.
A will is limited to property that does not already pass automatically to beneficiaries.
Your will cannot override deeds or beneficiary designations. Whether you have a will or not, it is important to periodically check your beneficiary designations to make sure they have kept up with changes in your life and are consistent with what you want
Trusts Provide More Privacy
A trust is a document that remains private, meaning that it will insulate your family from the spotlight of the community and from the claims of creditors.
Incapacity
A will only takes effect upon your death. The shortcoming of a simple will is that it does not name someone to make decisions on your behalf if you should become incapacitated (e.g., you fall into a coma, you’re in a car accident, or you have a stroke).
Estate Tax Planning
Do you expect your estate to owe estate taxes? A basic will cannot help you lower the estate tax burden on your assets after death.
Special Needs Trusts
Do you have a child or other beneficiary with special needs? Leaving money directly to a beneficiary who has long-term special medical needs may threaten his or her ability to qualify for government benefits and may also create an unnecessary tax burden. A simple vehicle called a special needs trust is a more effective way to care for an adult child with special needs after your death.
Other components to consider include:
* General Power of attorney. Such powers enable someone you name to act on your behalf. A “durable” power will remain in effect, even if you become incompetent.
* Health Care Power of Attorney. This document authorizes someone to make medical decisions for you, if you can’t make them yourself.
* Beneficiaries. Life insurance, retirement accounts, and payable-on-death bank accounts will go to the people you name on beneficiary forms, without going through probate.
* Advanced Directive/Living will. This instrument states whether or not you’d want life-sustaining efforts.
The idea of a simple will is very appealing, but the will is just one piece of the entire puzzle and a simple will alone rarely meets the most common goals of estate planning. If you are ready to get your affairs in order, contact us today to schedule your Personal Strategy Session.