When deciding between wills and trusts for securing your legacy, it is important to realize that trusts are much more versatile than a will and that trusts give you much more control over assets. When you create a last will and testament, you dictate who inherits but you have limited or no ability to protect the assets.
Estate tax is a risk and you will not be able to protect heirs or beneficiaries from financial loss if you simply leave them money in a will. Trusts can give you much more control over assets after you are gone, and- depending upon the kind of trust that you create- trusts can also protect your assets during your lifetime as well. A will obviously cannot do that.
There are different kinds of trusts that could be created. A revocable trust is one type of trust. A revocable trust gives you flexibility over trust assets during the course of your life while allowing you to still arrange the transfer of those assets outside of the probate process. However, there are limits to a revocable trust.
First, just because the assets are able to be transferred outside of the formal probate process does not mean the assets are not counted as part of your taxable estate for determining if you’ll owe estate taxes or not. Second, the assets held in an revocable trust are generally not protected from claims by creditors and are not going to be protected in case you need nursing home care and want Medicaid to pay for the costs
Trusts are often created in order to provide protection for loved ones, such as a spendthrift trust which ensures that heirs do not squander their inheritance. When you are creating a trust to protect those who matter in your life, don’t forget your pets. A pet trust can help you to ensure that there is money available to provide for the care of your animals after you are gone. Pets can be very expensive and you do not want your animals to be deprived of the care that they may need simply because there is not enough money.
While you could simply leave money in your will for the care of pets, this would not necessarily ensure that the money was used for its intended purpose. Animals, of course, cannot directly inherit or manage money, so leaving money in a will is not the best way to ensure that these animals are cared for.
A better option is to create a trust, name a trustee who will have a fiduciary duty to use the money to provide care for a pet, and name the pet as the beneficiary. You can provide specific instructions for the trustee regarding exactly how the trust assets should be used to care for the pet and regarding what should be done with any money that is left over at the end of the pet’s life. It is common, for example, for remaining funds in the trust to be donated to some type of animal rescue group or animal welfare group.
Creating a DIY living trust is generally not a good idea. In fact, creating any kind of DIY trust is usually not advisable. When you create a do-it-yourself trust, you miss out on the opportunity to get legal advice. Your attorney may have been able to help you to find a better estate planning tool than the trust you are trying to create, which would have accomplished your goals in a more efficient and effective way.
An attorney can also help to make certain that the trust will actually provide the benefits you are hoping for, and will assist you in making certain that you fund the trust properly so all of the assets you are trying to protect can be kept safe. Finally, an experienced attorney can assist with the selection of a trustee and with the creation of a legally valid trust document so you will have the peace of mind of knowing you have created a valid trust with the right trustee in control.