If you are like many, you delayed creating an estate plan because it seemed complicated and expensive to do. When you finally decided that a plan was an important way to protect your assets and your loved ones, it is understandable that you would want to choose the simplest way to do so. Most people consider writing a will as the most basic estate planning step to take.
Writing a will may be a straightforward way to assign your assets to your loved ones, but it may not be the most effective way to protect your wealth or your beneficiaries. In many scenarios, a revocable trust may be a more prudent avenue for preparing your estate.
A will may not be enough
What many do not realize when they choose a will as their only form of estate planning is that, while it is certainly inexpensive to execute, it can be costly for your family in the long run. A will must go through the probate process, and that can siphon thousands of dollars from the value of your estate, not to mention additional costs if complications arise, such as a will contest. Neither can a will protect your loved ones from federal estate taxes if they apply.
The benefits of a trust
More often, Colorado residents are turning to revocable living trusts as the centers of their estate plans. When you establish a trust, the trust becomes the owner of any assets you fund to it. You maintain control of the assets during your lifetime, and your designated trustee takes over management of the trust if you become incapacitated or pass away. Like a will, your trust has instructions for the distribution of the assets it holds. However, a trust has these added benefits:
- As long as its assets are properly funded, a trust does not need to go through probate, so your loved ones may obtain their inheritances faster without the added expense.
- The assets in the trust may avoid some tax ramifications.
- Your trust may continue to hold and manage assets for heirs who are minors or who are incapable of handling a large inheritance.
- You can establish your trust to protect the assets and your heirs from future creditors.
- A trust allows for more flexibility in choosing your heirs.
- Your trust is not a matter of public record like a will.
You likely have other assets, such as retirement funds and insurance policies. When discussing the benefits of a living trust with your attorney, you can also learn the best ways to ensure those accounts go to their intended beneficiaries.