Understanding wills and trusts || Thomas Callaway

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Everyone has heard the terms “will” and “trust,” but not everyone knows the differences between the two. Wills and trusts are important tools of estate planning. Each has strengths and limitations. Here’s what to know as you determine what’s best for you and your estate plan. 

 

A will is a legal document that helps ensure your assets are distributed according to your wishes.  A will can accomplish four things, to occur upon death:

• Assign someone to oversee your estate.

• Name the personal guardian who will care for your minor children and the person who will manage the children’s assets. 

• State how your assets and property will be distributed. 

• Help manage estate taxes and related costs.

 

Without a will, your state’s inheritance laws will dictate who gets what, generally deferring to your spouse, then your children or next of kin. The court will determine who becomes your children’s guardians until the age of emancipation.

 

The following limitations of a will may prompt you to look for a more comprehensive estate planning tool, such as a trust.

 

1. Having a will does not eliminate the probate process. Governed by your state’s laws of inheritance, probate is a legal proceeding that oversees the division of your property. There are costs involved. The details of your probate will be made public, which can put your beneficiaries at risk of unwelcome solicitations.

 

1. A simple will cannot void your spouse’s rights to inheritance, so it may not be adequate if you wish to make special gifts or “bequests” to a friend or charity. 

 

A trust is a legal entity designed to provide additional protections to your estate. A revocable living trust is the most common trust option. It can accomplish four things:

• Assign a trustee to oversee your estate.

• Avoid the probate process and its associated costs.

• State how your assets and property will be distributed. 

• Keep the details of the distribution of your estate assets private. 

• Help manage estate taxes.

 

To take effect, the title to your assets must be transferred to the trust during your lifetime. These assets can include cash, stocks, bonds, real estate, artwork, and insurance policies. You can still retain control of the assets placed in your trust during your lifetime. 

 

A trust can provide greater assurance that your property will be managed according to your wishes, including the distribution of charitable gifts. It can also fulfill your wishes for the care of special needs children into adulthood without jeopardizing government assistance. It’s a preferred way to avoid the delays of the probate process and some trusts can help protect your assets from potential creditors.  While a trust can be expensive to establish and maintain, the benefits can ultimately outweigh the drawbacks for large and complicated estates.

 

Put your estate in order. Most individuals enlist an estate planning attorney to help create a will or trust. The size and complexity of your estate and your family’s goals will help you determine which arrangement works best for you. Your financial advisor can help you explore these options and decide how to optimally pass your assets to your heirs. 

 

Thomas A. Callaway CRPC®, is a Financial Advisor with Ameriprise Financial Services, Inc. in Paris TX.  He specializes in fee-based financial planning and asset management strategies and has been in practice for 29 years. To contact him you can go to www.ameripriseadvisors.com/thomas.callaway or call (903)785-7000, office located at 2219 Lamar Ave Paris TX 75460.

 

This information is being provided only as a general source of information and is not a solicitation to buy or sell any securities, accounts or strategies mentioned.  The information is not intended to be used as the sole basis for investment decisions, nor should it be construed as a recommendation or advice designed to meet the particular needs of an individual investor.  Please seek the advice of a financial advisor regarding your particular financial situation.

 

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Ameriprise Financial, Inc. and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation.

 

Investment advisory products and services are made available through Ameriprise Financial Services, LLC, a registered investment adviser.

 

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