Estate Planning – Wills Versus Trusts

Estate planning combines financial and legal elements that consider you and your loved ones now and after you die. With so many aspects to deal with, the process can be confusing. Before you meet with your fiduciary financial advisor in Centennial, it is a good idea to at least know what questions to ask. Do you need a will, or is a trust the right decision?

• What is a will?
• What is a trust?
• from a testamentary trust?
• How to Decide – A Will or a Trust?

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The purpose here is to address these issues and hopefully shed some light on the details. So, then you can take the next step in meaningful estate planning with your fiduciary financial advisor in Centennial.

What is a Will?

Most people are familiar with wills. A will is the document used to describe how you want to direct your estate distribution upon your death. Usually, you have your will signed and witnessed by two uninterested parties. Uninterested parties do not stand to inherit anything from your estate. You are always free to change a will at any time unless you become mentally incapacitated. Your will allows you to appoint guardians for your minor children in the situation where you and your spouse (if applicable) both die before your children all reach the age of majority.

What is a Trust?

Trusts are less well understood. A trust requires three people and assets. The assets are held by the trustee (person number one), at the request of the settlor (you), for the benefit of the beneficiary (your loved one.) The trustee has legal title to the asset and holds it in trust for your loved one. A trustee owes a fiduciary duty to your beneficiary. That means they must act in a way that benefits your loved one, not themselves (the trustee.)

Most of the time, the duties of the trustee include converting all debts and securities, not qualified legal instruments, into cash. And then to reinvest that cash into proper securities. All designed to preserve and protect the trust property and ensure the trust assets employ only for your beneficiary, based on the directions you laid out in the trust agreement.

How is a Living Trust Different from a Testamentary Trust?

As you would imagine, a living trust is created while you are alive. You can change any aspect of it during your lifetime. A living trust provides management of your estate during your lifetime and after your death. On the other hand, a testamentary trust is created by your will and does not take effect until your death.

How to Decide – A Will or a Trust?

Whether you decide on a will or a trust in your estate plan depends on several significant factors:

• Do you have minor children? A will may be sufficient to appoint a guardian.
• Do your children or grandchildren have special needs that require specific financial support? You may consider a trust to pay their expenses long-term.
• How do you plan to pass your estate on to your beneficiaries? Is a one-time outright distribution sufficient, or do you need to establish distributions when the beneficiary reaches a certain age? A will can outline a one-time outright distribution, whereas a trust establishes later distribution.
• Is your estate subject to estate taxes? A trust may reduce the tax burden.
• Are you concerned about the upfront costs as you create your estate plan? Legal fees are normally lower to draw up a will.
• Is avoiding probate important? Probate legally establishes that a testamentary document is a valid will. During probate, your will becomes public record. A trust never enters into probate.

Most importantly, secure the services of an attorney specializing in estate planning. Then discuss the issues with your fiduciary financial advisor in Centennial. Your decisions about wills versus trusts impact your legacy, possibly for generations.

The information provided is for informational and/or educational purposes only and is not, in any way, to be considered investment advice nor a recommendation of any investment product. Advice may only be provided by GreenStar Advisors’ investment advisor representatives after entering into an advisory agreement and providing us with all requested background and account information.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.