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When planning for the future and the well-being of loved ones, it’s crucial to consider estate management tools like revocable trusts and wills. S Brad Dozier discusses the differences between these two options and helps you determine which is right for your client’s unique estate planning needs.
A revocable trust, often called a living trust, is a legal entity that holds and manages assets during your lifetime and after your passing. The person creating the trust, known as the grantor or settlor, maintains control over the assets in the trust. This means they can modify or revoke the trust at any time. It’s like having a special box to keep your important belongings safe while you’re alive.
A will, on the other hand, is a legal document that outlines your wishes regarding the distribution of your assets after your passing. In a will, you specify who should receive what, and you can also appoint guardians for any minor children. Think of a will as a letter to your loved ones, telling them what to do with your things when you’re not around to say it yourself.
Now, let’s delve into the main differences between revocable trusts and wills:
Probate is the legal process where a court validates a will and oversees the distribution of assets. Revocable trusts are designed to avoid probate, as the assets held in the trust are not subject to this time-consuming and costly process. In contrast, wills typically go through probate, which means a court will review the will’s instructions before distributing the assets.
Revocable trusts provide a level of privacy that wills do not. When a will goes through probate, it becomes a public record. Anyone can access and review the will’s contents, including the details of your estate and beneficiaries. In contrast, revocable trusts remain private documents, preserving the confidentiality of your estate matters.
Wills allow you to designate guardians for minor children and specify your wishes regarding your assets. However, a will’s instructions are not effective until after your passing. Revocable trusts, on the other hand, allow you to manage and distribute assets during your lifetime. This can be helpful if you become incapacitated or want to ensure a smooth transition of your assets while you’re alive.
Revocable trusts are more flexible than wills. You can amend the trust as your circumstances evolve, which can be especially beneficial if you have complex or changing financial situations. Wills, once executed, are more challenging to alter without creating a new one.
Creating and maintaining a revocable trust may cost more upfront than drafting a will. However, they can save money by avoiding probate and legal fees. In the long term, revocable trusts can be cost-effective.
Whether a revocable trust or a will is the right choice for your client’s estate plan depends on their specific goals and circumstances. If your client has a complex portfolio of assets, including real estate, business interests, or substantial investments, a revocable trust can help manage these assets more efficiently. Also, if your client values privacy and wants to keep their estate affairs confidential, a revocable trust may be the better option. Moreover, a revocable trust allows for more comprehensive planning if your client is concerned about managing their assets in case of incapacity.
However, you should weigh the upfront costs of establishing a revocable trust against the potential savings and benefits over time. Additionally, a will can be a simple and effective solution for individuals with straightforward estate plans and no need for ongoing management. Often, combining both a revocable trust and a will can be a suitable approach, providing the best of both worlds.
Ultimately, whether your client should choose a revocable trust or a will largely depends on their unique circumstances and preferences. While both options have advantages, S Brad Dozier believes it’s essential to tailor the estate plan to meet your client’s needs. By understanding the key differences and weighing the benefits of each option, you can guide your clients toward making the right choice to protect their assets and provide for their loved ones. Estate planning is not a one-size-fits-all endeavor, and by choosing the right tool, your clients can ensure their legacy is handled as they desire.