The main legal document in an estate plan is a will. A will is essentially a set of instructions that dictate how assets are distributed. Heirs and beneficiaries can benefit from a will, but there can be some issues that prevent that from happening.
For starters, a will is submitted to probate court, which allows the executor of the estate to do their duty. An executor is meant to contact heirs, pay taxes and debts and distribute assets. However, probate can take several months to a year. If a will is contested, then probate may take longer until a dispute is resolved. And, assets in an estate may be taxed.
Testators who want to avoid these issues may consider making a trust. Here’s what you should know:
Advantages of a trust
A trust is a legal document that allows a grantor to give a trustee assets. The trustee is then responsible for distributing assets to beneficiaries as instructed. Assets in a trust fund can immediately go to beneficiaries without waiting for probate. Furthermore, a trust doesn’t have estate taxes.
Consider your trust fund options
The most basic trust fund is a revocable trust. A revocable trust can be altered by the grantor at any time to include or remove assets and beneficiaries. Once the grantor passes away, the revocable trust becomes irrevocable and can no longer be altered by the grantor.
While this sounds like the most beneficial trust fund for many people, it’s not the only option. For example, if a grantor has a pet, then they may place assets in a trust fund that would be used for the pet’s food, clothing, care, shelter, toys and veterinary bills. Or, a grantor could make a special needs trust. A special needs trust is designed to protect a beneficiary’s right to government benefits, like Supplemental Security Income, while still providing for their needs.
It’s important that grantors understand their legal options when making their estate plan.