Trusts and wills are both common estate-planning tools that can help you pass assets on to loved ones and ensure that your wishes are followed.
Wills let you leave behind a legal record of your wishes regarding the distribution of your assets. Trusts are a legal vehicle that can hold certain assets, which are distributed to beneficiaries following the rules you set forth in the trust.
FAQs About Wills
What is the legal purpose of the will?
The legal purpose of a will is to ensure your wishes are followed as much as possible given state inheritance laws.
When do you need a will?
A will is helpful whenever you have assets that you want to pass on to certain loved ones. You don’t need a certain amount of assets or wealth to use a will.
When should you set up a will?
It’s never too early to set up a will, and many legal professionals recommend setting one up now, because you can’t know when it might be needed.
Who should help you set up a will?
You can set up a simple will via online programs such as Everplans, and you might ask a trusted loved one or friend to assist you. If you’re nervous about a DIY option or have more complex assets and wishes, you can work with an estate attorney to set up a will.
If you do go with a DIY will, make sure you execute it – a term for “sign it” – in front of a notary public. Have the notary witness and certify the document; this may cost around $10 to $30, but it adds legitimacy to your will and makes it a bit more difficult for someone to contest it. Note that notaries will not offer advice on how to execute your will properly; you’ll need to arrive with all the documentation ready for signing.
What should you consider when setting up a will?
You’ll need to consider both the legal requirements of a will in your state and your own wishes. Inheritance laws are different in every state, and a will doesn’t automatically trump all of them. That means you can’t necessarily leave everything to a friend if you have a spouse and children – some state laws protect the right of certain heirs to inherit at least a portion of the estate. You can find a list of Intestate Succession Laws via the FindLaw website.
Before creating a will, gather your thoughts about your wishes. Consider writing down:
- A list of your assets (both physical and digital)
- Who you want to receive special assets, such as pieces of jewelry or keepsakes
- All the heirs you’d like to include in your will
What are the costs of a will?
You can download free will packages to create your document yourself, only paying fees for notarization if necessary. You can also pay for an online service that provides templates and some tools to help with will creation; fees can range from $9.99 to around $100 for such services. Always read reviews and never deal with a company that doesn’t have full contact information and customer support to avoid potential scams.
Nolo reports that wills drawn up by attorneys can cost between $300 and $1,200.
Who should you tell about your will?
Consider informing your:
- Next of kin
- Other close relatives and friends
- Lawyer
- Any person responsible for helping you manage your assets
- The person you choose as executor of your estate
FAQs About Trusts
When do you need a trust?
Use a trust when you want to protect certain assets from creditors or you want to exert some type of control over how the assets are distributed after you pass away. For example, you can fund a trust with cash for your child and stipulate that the assets can only be used for educational expenses.
When should you set up a trust?
Set up a trust when you have assets that you want held securely for future use by a beneficiary. The beneficiary can even be you.
Who should help you set up a trust?
Trusts are generally more complicated than wills, so it’s a good idea to work with an estate attorney to set one up.
What should you consider when setting up a trust?
- Know what protections the trust affords; some trusts offer limited protection from taxes and creditors.
- Consider how you want to fund the trust; trusts can hold cash, investments, and even real property such as cars or homes.
- Who you’ll appoint as a trustee to manage the trust.
- Finally, determine who the beneficiaries of the trust will be and what rules you want to set up for use of the assets:
- Should the beneficiary be a certain age before they can access the assets?
- Do you want the assets used for specific purposes, such as education or buying a home?
- Should withdrawals from the trust be limited to a certain amount each month?
What are the costs of a trust?
It depends on how complex the trust is, but costs usually start around $1,000.
Who should you tell about your trust?
Consider informing your:
- Next of kin
- Other close relatives and friends
- Lawyer
- Any person responsible for helping you manage your assets
- The person you chose as trustee
- The executor of your estate
- The beneficiaries of the trust
For more information regarding planning for your final affairs, check out our Thinking Ahead email series.
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