The difference between a will and living trust

Do you know the difference between a will and a living trust? When thinking about estate planning, there are many different kinds of estate planning documents to consider and it is important to understand the difference between a will and a living trust before deciding which one is right for you and your family.

Estate planning is important for everyone, especially individuals who own property and other assets that are valuable or important to keep in the family. A will or living trust can help legally document what will happen to those assets and possessions and make sure your wishes are known. 

A will and a living trust are both documents that can be created in an estate plan to notify your family and the government about what should happen to your assets and possessions. How are wills and living trusts different?

A will is a document that explains how a person’s estate will be distributed after their death. A living trust is a document that allows a person to appoint someone to be responsible for transferring their assets to the trust while they are still alive. A living trust works by having the trustor or person who created the trust appoint a trustee who will be responsible for transferring assets to the beneficiaries of the trust. 

When deciding which option is better, it is important to know that a will is required to go through probate and a living trust is not. Probate is the process that transfers property after a person dies and it usually involves a court hearing arguments if anyone contests the will. 

Another difference to consider is that assets will not be distributed until after your death in a will while assets in a living trust are only distributed while you are alive. Not everyone benefits from having a living trust but they can be very helpful for parents with minor children. 

Individuals should understand the differences between a will and living trust and decide which is best for them. People can also have both documents in their estate plan or decide on neither. However, it is best to have at least a will to help your family avoid costly and timely disputes after you pass away.

Source:  FindLaw, ” Will or Living Trust: What’s the Difference? ” Betty Wang, July 29, 2013

When should you update your will?

One of the most important documents a person can have in their estate plan is a will. A will lets your loved ones know your last wishes, including what should happen to your possessions and who will receive inheritance. One of the biggest advantages of having a will is that it not only lets your family know your wishes but it should help prevent disputes between family members after you are gone.

Having a will can be very beneficial, but it is important for individuals to remember to review and modify their will as necessary to make sure it is up-to-date and correct. Updating a will is not a difficult process but many people are not sure how often to review their will and when to make changes.

Changes may happen to a person’s family all the time but there are certain times when it is essential to update your will to ensure that your wishes will be carried out in the event of your death. Whenever you move, your will should be updated to reflect current estate planning laws. It is very important to review and make changes to your will after moving to a different state because the will may no longer be valid under new state laws and guidelines. 

Another reason to update your will is when you acquire an additional amount of money that significantly changes your wealth. This includes having acquiring more money as well as additional properties, vehicles and even jewelry.

It is also important to review and update your will whenever there are new family members or when someone gets divorced. Not including new children or removing an ex from your will can cause arguments and hurt feelings down the road.

In addition to updating your will after these life changes, it is important to review your will every couple of years to make sure everything is correct and up-to-date. If the will needs to be revised, take steps to update your will now before it’s too late.

Source:  FindLaw, “T op 5 Reasons to Update Your Will ,” Betty Wang, Aug. 15, 2013

What does the executor of an estate do?

One of the most important parts of estate planning is deciding who will be the executor of your estate. All wills have an executor appointed to manage the estate, regardless of if you name an executor or if the state court does. Since an executor is necessary and will be in charge of managing your estate, it is important to pick someone who is trustworthy and responsible.

The executor of your will and other estate planning documents is responsible for managing the terms of the estate and making sure your wishes are honored. Choosing an executor can be a difficult decision as some people may feel honored while others may see it as a burden so it is important to understand what the executor is responsible for before appointing someone as the executor of your estate.

The executor of an estate is often required to manage the estate’s assets, which includes paying any bills and taxes due and distributing any inheritance to heirs. Other major responsibilities include managing the estate’s paperwork. This can include the will, insurance policies, trusts, bank and retirement accounts, tax records and real estate deeds.

Executors are responsible for notifying parties of the death, which could include notifying government agencies and financial institutions. The executor is also responsible for filing a certified copy of the will in probate court. If probate is required and the executor is confirmed, the executor will have legal authority to manage and act on behalf of the estate. This could mean opening bank accounts to pay outstanding bills and debt.

The executor is also required to file the final federal and state tax returns on behalf of the deceased. This includes filing federal and state estate tax returns if necessary.

When choosing an executor for your estate, it is very important to understand what he or she will be responsible for and if they will be able to handle the time-consuming responsibilities. Individuals selecting an executor or someone who has been appointed an executor of an estate should consult an estate administration attorney for assistance if they have questions or need help.

Source:  NJ Today, ” Should You Become Executor of Someone’s Estate? ” Aug. 12, 2013

Discuss estate plan with family before it’s too late

Estate planning is a very important part of financial and retirement planning in the U.S. Americans seem to understand the importance of estate planning, with 90 percent of adults saying that estate planning is very important, according to a BMO Management survey.

Even though a majority of Americans say that estate planning is important, the same survey reported that only 19 percent of U.S. adults have had a detailed conversation with their parents about estate planning. Failing to discuss estate planning options can lead to difficult decisions and fights over the family legacy and inheritance instead of bonding and sharing memories with loves ones after a beloved family member has passed away.

Families should be aware of their estate planing options and parents should discuss these options with their children and other family members so there are no surprises after they pass away. Parents can use estate planning to create a family legacy that will make sure their family is taken care of as well as help their family have positive memories of their family instead of fighting over inheritance or the family home.

Once parents have made their estate plan , including specific decisions on inheritance and beneficiaries, it is important to talk about these decisions with their children. While these conversations may be difficult, it can help the family understand why the estate plan was created the way it was and hopefully reduce tension and future fights over the terms of the estate plan.

Parents should inform their children about what estate planning documents they have created and what is included in these documents to allow the family to understand what will happen after you pass away and what is expected of them. While this conversation can be difficult to start, discussing your estate plan with your children should help everyone be on the same page as well as allow the family to ask questions or bring up concerns now while they still can.

Source:  The Street, ” We All Say Estate Planning Is Important, Yet Here’s How Few of Us Do It ,” Brian O’Connell, August 1, 2013

Common estate planning mistakes to avoid

Estate planning is a very important process that should not be taken lightly as improper planning can cause tension and stress between family members after you pass away. 

Unfortunately, even the best intended estate plans may still lead to disputes after you’re gone due to mistakes made in the estate plan. There are many different considerations to make when creating your estate plan and it can be easy to make a mistake.

Individuals and families creating an estate plan or those who already have an estate plan should be aware of common estate planning mistakes and take steps to fix them before it’s too late.

What are the most common estate planning mistakes? Some of the most common errors are listed below.

Failing to address and plan for estate taxes is a very common mistake. Creating a trust or giving gifts to heirs can help address some issues with estate taxes. Estate taxes can be difficult to plan for, which is why it is important to consult an estate planning attorney. 

Another common mistake is choosing the wrong executor for your estate plan. Do not choose someone to be the executor of your will and other estate planning documents if they have a conflict of interest. It may be best to choose someone who will be unbiased instead of a relative who is also a beneficiary. 

Financial documents should be organized with notes on how and where to access each account. Many estate plans fail to organize their financial documents and family members have a difficult time gaining access to these accounts and may not even know that some financial accounts exist.

Failing to update estate plans is a very common mistake and can lead to many disputes in the future. Any time there is a change to the family through marriage, divorce, death and new children, the estate plan should be reviewed and updated as necessary. If estate plans are not updated, an ex spouse could still be a beneficiary in the estate plan and cause disputes and hurt feelings after your death.

There are many other types of estate planning mistakes that individuals should be aware of. Individuals should consult an estate planning attorney to create or review their estate plan to make sure their estate plan is accurate and up to date. 

Source:  US News, ” Estate Planning Lessons From James Gandolfini ,” Kimberly Palmer, July 16, 2013