As you start to get older and begin looking into building up an estate plan, one of the things you have to think about is how you’re going to protect your assets and pass them on to those you love.
You have a few options, but many people believe that a will is the first, and only, thing they need. In reality, a will is helpful, but it may not provide the protections that you were hoping for.
What does a will do?
A will tells people your wishes. It helps with the distribution of your property. It makes it easier for your executor to handle your estate and close it out without probate, in some cases.
What can’t a will do?
A will doesn’t offer certain kinds of protections that other options would, such as if you had a trust. For example, wills can’t take assets out of your name and hold them outside the estate, meaning that all your assets in the will could still be taxed or sought by creditors. That’s why a will should be used in combination with trusts and other protective measures.
Why is having a trust a good idea?
Trusts come in a few forms, but what makes them special is how they can protect your assets and help your estate stay out of probate. For example, an irrevocable trust takes assets out of your name. While you’re alive, you’ll still have access to them, but if you go into debt and have creditors come after you for payment, your assets can’t be touched.
You may also see a reduction in taxation, because the assets technically no longer belong to you. Therefore, the value of your estate is lowered.
In addition to these benefits, you can reduce the overall value of your estate with trusts to make it easier to qualify for Medicaid and other protections as you age. So, even during your lifetime, you can use your trusts to protect your best interests.
These are some reasons why you should use a will and trust in combination. While each are beneficial on their own, having both can offer additional protection.