Will or Living Trust? - Estate Planning in 2024

Picture this case:

The approaching golden years depict well-deserved rest for John and Jane Smith. This couple in their late 50s, with two adult children, has built a solid foundation.

Their cherished home, a testament to years of shared experiences, is worth $500,000. Through careful planning, they've amassed a nest egg of $1 million in retirement savings, bolstered by another $200,000 in investments and assets.

But a looming question regarding estate planning hangs heavy in the air: how will this legacy be secured for the future?"

The Smiths’ situation reflects a common scenario for many Americans.

Only 33% of Americans have an estate plan, leaving 67% vulnerable to state intervention in asset distribution.

Probate can consume 3-7% of an estate's value without a plan, risking assets not reaching intended beneficiaries.

The choice many face – a will or a living trust – is crucial. The ideal path hinges on several factors, including specific goals, the types of assets held, and the desire for privacy.

But with so much at stake, which path is best?

Medallion Financial Resources Explains Your Options: Living Trust vs Will for Estate Planning

When it comes to ensuring your loved ones are taken care of and your wishes are respected, estate planning is the roadmap that guides you. It's a comprehensive approach to managing your finances, property, and legacy, both during your lifetime and after you're gone.

At Medallion Financial Resources, we understand the importance of estate planning for your family's security and peace of mind.

Our experts create personalized strategies tailored to your goals, maximizing Social Security, incorporating annuities and life insurance, and securing your legacy with long-term care planning.

In this article, we will discuss:

• What is a Will?
• What are the types of a Will?
• What are the Components of a Will?
• Key Requirements for a Valid Will
• What Is A Living Trust?
• What Are the Types of A Living Trust?
• What Are The Components Of A Living Trust?
• Considerations and Limitations of Living Trusts
• What are the Advantages of Living Trusts?
• What Living Trusts and A Will Cannot Do?
• Do I Need a Will or a Living Trust?
• What If I Don't Have a Will or Living Trust?

Understanding the key differences between wills and living trusts is crucial for effective estate planning. Both are important, but they work differently. Knowing how they differ can help you choose the right option for your needs.

What is a Will?

A Will, formally known as a last will and testament, is a legal document that outlines your wishes regarding the distribution of your assets, including savings accounts, personal possessions, real estate, and more. It can also appoint guardians for your minor children and designate beneficiaries for your life insurance policy.

After your passing, they will undergo a legal probate process where the court validates the document and oversees the transfer assets to the named beneficiaries.

During probate, the court also ensures that any outstanding debts are paid and that the estate is distributed according to your wishes as stated in the will. Probate can be time-consuming and involve court fees, which can diminish the value of your estate.

This is especially true for estates that exceed the federal estate tax threshold. However, some states have their own estate and inheritance taxes that could apply even to smaller estates.

It's important to note that having a valid will in place can help simplify the probate process and ensure that your assets are transferred to your intended beneficiaries efficiently. Without a will, the state's intestacy laws will determine how your assets are distributed, which may not align with your wishes.

What are the types of a Will?

When it comes to estate planning, there are several types of wills to consider, each with its advantages and suitability for different situations.

Here are some of the most common types of wills:

• Simple Will - A straightforward document suitable for small estates with uncomplicated asset distribution wishes. It is relatively easy to create but may not cover all last wishes in some states.
• Testamentary Trust Will - Creates a trust after the testator's death, naming a trustee and beneficiaries with instructions on asset management and transfer. Ensures assets are distributed according to the testator's wishes.
• Joint Will - A single document for married couples detailing their estate distribution wishes. It cannot be altered without the consent of both parties and becomes irrevocable upon the first spouse's death.
• Living Will - Focuses on medical care instructions if the testator becomes incapacitated. Specifies preferences for life-saving measures and end-of-life care.
• Pour-Over Will - Works with a living trust, directing assets not directly assigned to beneficiaries into the trust after death. Ensures all assets are managed according to the trust's terms.

What are the Components of a Will?

The four main components of a will are:

• Testator's Information- This section includes the testator's (the person creating the will) full legal name, address, marital status, and dependents. Verifying the testator's identity is crucial for the will's legal validity.
• Declaration of Intent- The declaration of intent is a legally binding statement that outlines the testator's wishes regarding asset distribution and guardianship of dependents. The language must be precise and unambiguous.
• Beneficiary Designations- Beneficiary designations are paramount in a will. The testator can designate various types of beneficiaries, such as family members, friends, or charities, to receive their assets. Thorough consideration and precise documentation are crucial for this component.
• Executor Appointment- The testator must choose a responsible and trustworthy person, often a family member, friend, or professional, to manage the estate and carry out the instructions in the will. An alternate executor should also be named in case the primary choice cannot serve.

Other important components of a will include guardianship for minor children, funeral wishes, organ donation preferences, and intentional omissions of certain individuals.

The will must be properly executed by the testator and witnessed by several adult individuals who are not beneficiaries.

Key Requirements for a Valid Will

After your passing, your Will goes through probate, a court-supervised process where the court verifies its authenticity, ensures its execution complies with legal requirements, and addresses any disputes that may arise.

Making a Valid Will:

• The will must be written and signed by a mentally competent adult
• Two or more mentally sound adults must witness it
• The will cannot be created under duress or as a result of fraud
• State laws vary, with some allowing oral or video wills, while others require a written legal document
• Handwritten wills may be permitted in some states
• Witnessing and/or notarization may be required for a will to be considered valid, depending on state laws

What Is A Living Trust?

A Living Trust is a legal arrangement where you transfer ownership of your assets to the trust during your lifetime. Unlike Wills, Living Trusts generally avoid probate, allowing for the efficient transfer of assets to beneficiaries without court intervention.

What Are the Types of A Living Trust?

Two primary types of living trusts offer distinct advantages and considerations in estate planning and asset management.

Revocable Living Trust

You control the trust during your life, but assets are still part of your estate for tax purposes.

Irrevocable Living Trust

Irrevocable trusts give up control of assets for tax benefits. There are many different types of irrevocable trusts designed for specific purposes, such as:

• Marital Trust: This trust benefits your spouse.
• Bypass Trust (Credit Shelter Trust): This trust shelters assets from estate taxes for your heirs.
• Charitable Trust: This trust benefits a charitable organization.
• Special Needs Trust: This trust provides for a disabled beneficiary without disqualifying them from government benefits.
• Life Insurance Trust: This trust holds a life insurance policy outside of your estate for tax purposes.

What Are The Components Of A Living Trust?

• Grantor: The person who establishes the trust and transfers assets into it.
• Trustee: The person or institution responsible for managing the trust assets according to the grantor's wishes outlined in the trust document. Initially, you can often be the trustee, retaining control over the assets.
• Beneficiaries: The people or organizations that will receive the trust assets after your death or at specified times during your life.

Considerations and Limitations of Living Trusts

• Funding: For a Living Trust to be effective, you must properly "fund" it by transferring ownership of assets into the trust's name. Assets not transferred may still be subject to probate and even estate taxes.
• Cost: Setting up a Living Trust typically involves upfront legal fees for drafting the trust document.
• Complexity: Living Trusts can be more complex to administer than Wills.

The Complexities: What Living Trusts and A Will Cannot Do?

Wills:

• Probate Avoidance
  • Wills cannot avoid probate, which can be time-consuming and costly.
• Incapacity Planning
  • A will does not provide estate planning basics for incapacity. If you become incapacitated and have no designated Power of Attorney, the probate court may appoint someone to manage your financial affairs, potentially someone you wouldn't have chosen.
• Limited Privacy
  • A Will becomes a public record during probate, which may be a concern for some.

Living Trusts:

• Limited Asset Coverage
  • Certain assets, like retirement accounts and life insurance policies with designated beneficiaries, typically bypass the trust and transfer directly to the beneficiaries according to the beneficiary designations, not necessarily according to the terms of your trust.
• Creditor Protection
  • Living Trusts may not fully shield assets from creditors in all situations. Consulting with an estate planning attorney is recommended to understand how trusts can impact your exposure to creditors.

Do I Need a Will or a Living Trust?

Now that you've gained a solid understanding of both wills and living trusts, a crucial question arises:

Which one is right for me?

Choosing between a Will and a Living Trust depends on your circumstances and goals.

Here are some factors to consider:

Asset Distribution Preferences:

Consider how you want your assets distributed. If you prioritize flexibility and immediate control over asset management during your lifetime, a Living Trust might be preferable.

A Will, however, offers a simpler way to outline your distribution wishes after your passing, especially for those with straightforward estates.

Probate Avoidance:

If minimizing probate-related expenses, delays, and public scrutiny is important, a Living Trust can expedite asset transfer and maintain privacy.

Incapacity Planning:

Living Trusts provide a mechanism for incapacity planning by designating successor trustees to manage assets if you become incapacitated.

Wills, on their own, don't address incapacity.
A separate Power of Attorney document would be necessary.

However, some states allow for the creation of a testamentary trust within a Will. This type of trust takes effect upon your death and can be used to manage assets for beneficiaries, including minor children, or for specific purposes.

What If I Don't Have a Will or Living Trust?

The absence of a Will or Living Trust can have significant consequences:

• Intestate Succession Laws
  • Your assets will be distributed according to your state's intestacy laws, which may not align with your wishes. This could result in unintended beneficiaries receiving your assets.
• Potential Disputes and Delays
  • Intestacy can lead to disputes among family members and delays in asset distribution as the probate court determines how to distribute your estate according to state law.
• Guardianship Determination
  • The court will appoint guardians for your minor children if you haven't designated them in a Will. This could result in someone you wouldn't have chosen being appointed as their guardian.
• Estate Administration Challenges
  • Your estate will likely go through probate, which can be time-consuming and costly, especially for complex estates.

Considerations for Comprehensive Estate Planning Process

A well-rounded estate plan may incorporate both a will and a living trust, along with other strategies like Powers of Attorney and healthcare directives, depending on your specific needs.

Consulting with an estate planning expert or an attorney is crucial to determining the best approach for your situation.

Regular Review and Updates

Your estate plan should be reviewed and updated periodically to reflect changes in your life such as marriage, divorce, the birth of children or grandchildren, taxable estate (the value of your estate's assets minus certain deductions), laws, and your wishes.

It's also important to review your estate plan in light of any changes in tax laws, such as modifications to the federal estate tax or your state's estate and inheritance taxes.

Why Medallion Financial Resources is Your Trusted Guide Through Estate Planning?

Planning for what happens after you're gone can be stressful. There's a lot to think about, and the legalities can be confusing.

But you don't have to do it yourself.

Medallion Financial Resources is here to help you make clear and confident decisions about your loved ones' future. Here's why Medallion Financial Resources is the perfect partner for your estate planning needs:

• Personalized Expertise: We understand every family's situation is unique. Our advisors take the time to understand your specific goals, assets, and wishes to craft a personalized plan that reflects your priorities.
• Comprehensive Solutions: We offer a thorough approach to estate planning, considering wills, trusts, power of attorney designations, and beneficiary selections.
• Experience You Can Trust: With extensive knowledge and experience, we can guide you through complex legal and financial considerations, ensuring your plan is effective and minimizes future burdens on your loved ones.
• Long-Term Partnership: Estate planning is an ongoing process. Medallion Financial Resources is committed to being your long-term partner, providing ongoing support, and ensuring your plan adapts to life changes.

With a meticulous approach to estate planning, regular reviews, and updates, Medallion Financial Resources ensures that your legacy is safeguarded and your wishes are honored with precision and care. We believe everyone deserves peace of mind knowing their legacy is protected.

Let Medallion Financial Resources be your trusted guide in navigating the complexities of estate planning.

- Don't wait until it's too late!

Contact Medallion Financial Resources at 1-941-486-0305 today to schedule a consultation with a dedicated advisor.

Together, we can create a comprehensive estate plan that minimizes future burdens for your loved ones and provides peace of mind knowing your legacy is secure.

You can also drop your inquiries and messages to James@medallionfinres.com or Rachel@medallionfinres.com

Conclusion: Securing Your Legacy with Confidence

In 2024, estate planning requires carefully considering whether a will or a living trust best suits your needs. Estate planning isn't just about legal documents; it's about protecting your loved ones and ensuring your wishes are fulfilled.

Whether you have a complex portfolio of assets owned or a simpler situation, Medallion Financial Resources can guide you through the process of transferring your assets to your beneficiaries smoothly and efficiently.

We've unpacked both a living trust and will information, explored the legalities, and highlighted the importance of a personalized plan to ensure your assets owned are distributed according to your wishes.

- Now, it's time to take action.

- Medallion Financial Resources: Your trusted partner in steering the complexities of estate planning.