People think that if you make a will, you escape the delay and expense of probate. You don't. Wills are good for many things, but not for sidestepping the probate process. To do this, you must consider creating a trust. A trust is kind of like a corporation — it is a legal entity that exists apart from you, and it never dies. Think of it as a set of unignorable instructions for the disposal of your estate.
Many people have no estate planning program of any sort, or they are relying on a will they drafted 30 years ago. This is a big mistake, and it will likely cost your heirs in time, stress and taxation.
Revocable living trust:
This kind of trust, which is ideal for most people, has three powerful objectives.
It sidesteps probate and it can avoid guardianships. Guardianships is a very expensive process.
It assists in reducing federal estate taxes. This kind of trust can have a second trust incorporated into it, called a credit shelter trust. This trust within a trust keeps federal and state taxation to a minimum.
Irrevocable spendthrift trust:
This is another trust vehicle that is becoming very popular. Its most common use is when you want to leave assets to minor grandchildren, but you do not want the funds going through an untrustworthy parent. The irrevocable spendthrift trust is much better than setting up guardianships. It puts the assets in the care of a trustee, who protects them until the children are of age.
A Major Mistake You Will Want to Avoid
Don't create your own trust based on a book you picked up at Barnes & Noble or something you read on an Internet site. A poorly made trust is worse than no trust. To create an ironclad trust that will ensure your directions are followed. Trusts give you power to manage your assets even when you're no longer with us.
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