By Sarah Duey, JD, CFTA, CAP®
Who wants to spend an afternoon thinking about their mortality? No one, which is why more than half of Americans don’t even have a will.
The foundation of your estate plan is a Last Will and Testament. Without a will, you are leaving the disposition of your assets and the guardianship of your minor children to a court. In my state, Nebraska, for example, if I were married at the time of my death and died without a will, my surviving spouse does not receive all of my assets if I have children.
Even from this one example, you can see that creating and structuring a will is complex, tackling everything from beneficiary designation and inheritance tax to life insurance and planning for potential probate. Let’s look at a few of the basics to help you start this important conversation.
What Is a Will?
A will is a legal document that directs what happens to your stuff, directs who will handle your stuff (your executor) and directs what happens to your children by naming a guardian to take care of them – in short, it’s an all-around good idea.
Where Can I Get a Will?
Check to see if your employer offers any kind of legal help or benefits. Some employers offer their stakeholders help in getting a will created. There are also online will-creation services. However, the big pitfall of the “DIY” will is that while a lawyer checks that the will complies with legal standards no one is verifying its correctness.
Hire an Estate Planning Attorney
For most people creating a will, hiring an estate planning attorney makes the most sense. The attorney verifies accuracy and can work with your financial advisor to confirm your will coordinates with your financial accounts, your savings plan and legacy wishes. Plus, the attorney can point out things that you may have never thought of – there are a lot of angles here, and a lot you can do to make sure your spouse, civil partner, children and other loved ones are well cared for.
It’s important to find an attorney who specializes in estate planning. State laws are constantly changing and you want to work with someone who is in that area of law on a daily basis so you can ensure you have a plan that complies. Ask friends and co-workers if they know a good estate planning attorney if you don’t know anyone. You can also look up your local estate planning council or bar association to see if they can give you some names to help with creating a will.
Next, you’ll want to connect with several estate planning attorneys and determine the best fit. Ask about the process and what fees you will likely face and ask about what you need to do to prepare for your next meeting. You’ll likely want someone who is younger than you so he or she can continue to help you with your planning needs throughout your lifetime.
Your estate planning attorney might have a questionnaire to complete prior to your first visit, covering anything from real estate and personal property to advance directive or health care plans. There are important questions that the attorney will want to ask and get answers to. Usually, an hour will set the attorney up for success in getting what he or she needs to draft a plan that accurately outlines your wishes and correctly complies with your state’s laws.
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What About a Trust?
Of course, creating a will is absolutely necessary regardless of whether you add a trust to your list of estate planning documents. But a common question is “do I need a trust?” Again, not surprisingly, the answer is, “it depends.”
A trust can be an important step toward fulfilling your family’s financial goals. There are specific advantages to having a trust: continuity of asset management, privacy and tax savings are among a few.
What Is a Revocable Living Trust?
A living or revocable trust provides for the organization and management of your assets during your lifetime, including any periods of disability. In addition, having your assets in a trust during your lifetime will prevent your estate from having to pass through a court-supervised process if you only have a will (or no will) at the time of your death.
Creating a trust also provides an incredible amount of flexibility after your death. For example, you could have your trust divide up your assets after you are no longer living and create new irrevocable trusts for your children to protect them against creditors and divorce.
The Drawbacks to Trusts
Trusts do have a downside. Compared with wills, creating trusts comes with additional work of funding the trust and making sure all assets are in the trust. Your attorney can discuss the options for creating and funding a trust with you. Regardless, you’ll still need a simple will, as a back-up, even if you do some trust planning.
Prioritize Your Estate Plan
Whether you decide to create a trust, prioritize getting your will and powers of attorney completed. Creating a will and other estate planning documents isn’t a Herculean task. The bonus of getting it done is that you’ll sleep better at night knowing you have a plan to take care of loved ones when the day comes and you are no longer able to.
Your financial advisor can help you begin this conversation in a way that makes sense for you and your family. Knowing not just your holdings, but your style and values will help you shape a legacy that expresses your care for the people and causes you love. Let’s talk!
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*Estate planning can involve a complex web of tax rules and regulations. Tax laws surrounding estate-planning concepts are subject to change please consult an estate-planning attorney prior to making any financial decisions. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.