April 26, 2017

Estate Planning: Will, Trust, or Both?

by: Melissa Love, CPA

Most people dread even thinking about estate planning.  Although not the happiest of topics, taking the time to explore options and make the appropriate decisions now, can help give you peace of mind later – and could save you money.  A properly planned estate is less about death and more about having control of your assets.

Everyone’s estate plan should include a Last Will and Testament  

A will is a document that directs your wishes after death.  It can designate both financial requests, like how your assets will be distributed, as well as your non-financial wishes, such as funeral arrangements or who will be granted guardianship of your children.  Without a will, your assets will be distributed according to state law.  Wills are both easy and inexpensive to create and can be amended throughout your life as your situation changes.

Utilize a trust to achieve your estate planning goals

A common misconception is that only the rich need trusts.  Depending on an individual’s situation, a trust can benefit more than just wealthy individuals.  There are many types of trusts available to suit specific needs and can provide benefits such as avoiding estate tax, disability planning, flexibility to access assets prior to death, and income tax savings.

A primary reason people choose set up a trust is to avoid probate.  Probate is a process that occurs after death, when a state court oversees the administration of the will.  It ensures debts are paid and the individual’s assets are distributed according to the wishes of the deceased.  This process can be very lengthy – lasting months to even years to complete, during which time the assets are not accessible by the beneficiaries.

Another benefit of a trust is that it takes effect when it is formed – unlike a will, which isn’t enforceable until death.  This is especially important if an individual becomes physically or mentally incapacitated prior to death.  Without any other directions, the court can take control of your assets prior to death.  A trust can specify your directives in the event of disability.

Trusts allow an individual to give detail on the timing and terms of the distribution of their assets, which can be useful to avoid possible creditors or lawsuits of designated beneficiaries.  Trusts can also be helpful if you plan to direct your assets to provide ongoing care for a beneficiary, such as a child with special needs.

For higher net worth individuals, those who own a lot of real estate, those with assets in multiple states, or those who have specific instructions how and when assets are to pass to beneficiaries, can benefit from utilizing trusts.

A will may be enough

Although they can be very beneficial, a trust is not always needed.  Trusts can cost thousands of dollars to set up, with additional charges to maintain or amend the terms in subsequent years.  In many cases, having a properly established will may be sufficient to suit an individual’s needs.  It is important to keep the details of the will current, and make it as detailed as possible, so there is no confusion when distributing the assets.

Avoiding or limiting your assets from probate is possible, even without a trust.  Assets with properly designated beneficiaries, such as life insurance policies and retirement accounts, are excluded from the probate process.  It is recommended if you are not utilizing a trust, that you take care to designate beneficiaries on as many of your assets as you can.  Ohio permits an individual to title investment and bank accounts as “payable on death” which designates a beneficiary, thus avoiding probate.

Taking the time to designate beneficiaries on your assets, making your wishes clear and detailed in your Last Will and Testament, and making the proper arrangements for how your affairs will be handled, both at death and in the event of disability, could be ways to achieve your estate planning goals without the need for a trust.

Each individual’s situation is different.  In each instance, we recommend you consult with a knowledgeable estate attorney to discuss which options will be most advantageous in achieving your estate planning goals.  Contact us for guidance and recommendations of attorneys in your area.

Hobe & Lucas Certified Public Accountants, Inc. is a full-service accounting and business consulting firm dedicated to providing clients with exceptional value.

Upload 8879 Make A Payment

Contact Info

6000 Freedom Square Dr #550

Independence, OH 44131

216-524-8900 info@hobe.com

Check us out on BrokerCheck®.

Investment advisory services are offered through Avantax Planning PartnersSM. Commission-based brokerage services are offered through Avantax Investment ServicesSM, Member FINRA, SIPC. Insurance services offered through licensed agents of Avantax Planning Partners. 3200 Olympus Blvd., Suite 100, Dallas, TX 75019. The Avantax entities are independent of and unrelated to Hobe & Lucas Certified Public Accountants, Inc.

Although Avantax does not provide or supervise tax or accounting services, our Financial Professionals may offer these services through their independent outside business. Financial Professionals may only conduct business with residents of the states for which they are properly registered. Not all Financial Professionals are licensed to offer all products or services. Financial planning and investment advisory services require separate licenses.