Most adults should consider having an estate plan to ensure the division of their property according to their wishes after they die. However, knowing whether you need to create a will, trust or both can be confusing.
Deciding which estate planning tools can suit your needs requires knowing how they function.
What Is the Purpose of a Will?
A will allows you to determine who will receive your assets after you are gone. Otherwise, New Jersey laws call for the courts to distribute your property among your closest living relatives, even if you prefer to disinherit them. In addition, a will is critical for naming guardians for your minor children and preventing a judge from choosing someone who may not be your ideal choice.
Wills must go through probate when they include assets without beneficiary designations. These include bank accounts, investment accounts and others. In addition, jointly owning a property with a spouse or someone else ensures its immediate distribution before a will enters probate.
What Is the Purpose of a Trust?
Depending on a person’s estate planning goals, it is possible to place various assets into a trust to shield them from probate. For example, a revocable trust allows grantors to use their assets during their lifetime. However, it is necessary to carefully select beneficiaries for revocable trusts, which become irrevocable upon the grantor’s death.
Others may decide to create irrevocable trusts for their beneficiaries’ future use. However, they must also name a trustee responsible for overseeing tax payments for the assets that the grantor no longer owns. Beneficiaries may receive trust assets immediately following a grantor’s death or at any time the grantor stipulates.
Carefully considering and revisiting your estate plan will ensure it meets the needs of yourself and your loved ones.