Will or Revocable Trust: Which Will Serve You Better During COVID-19?
The COVID-19 pandemic has revealed to many the inadequacies of their current estate planning. For some, that realization came too late.
If you are like many Americans, you may be wondering what you can do to get your estate planning in order. The topic can be confusing, and the many different documents needed can be intimidating.
One of the questions you might have is whether you need a will or a revocable trust. We’re going to examine what each of these documents does and provide some information to help you clarify which is right for you.
What Is a Will and What Is a Revocable Trust?
Both documents serve a similar function: they lay out how your assets should be distributed upon your passing. However, there are a few differences that are important to understand.
A trust is a legal structure that allows you to skip the probate process. This can have numerous benefits. One of the more important is that it saves money and time when your heirs go to collect on your assets.
Typically, the assets you select will become a part of the trust. The trust owns those assets with you as the beneficiary. With a revocable trust, you have more freedom in how you manage your assets. You can choose to move assets in or out, or you can opt to dissolve the trust altogether.
The opposite of this would be an irrevocable trust. With an irrevocable trust, you get significant tax breaks. The primary issue is that you cannot move items out of the trust.
A revocable trust allows you complete control over the structure. You are the beneficiary and the trustee. You can select your successor trustees to take over upon your passing. It gives you the control of a will without the probate process and more flexibility than an irrevocable trust.
Most people are familiar with a will when it comes to estate planning. This document allows you to select beneficiaries who will receive your assets upon your passing.
The primary issue with a will is that it can only be fully resolved after the probate process has been completed. During the probate process, a personal representative is chosen by you or the statute to ensure the proper distribution to beneficiaries occurs. However, this will only happen after all creditors have been paid off, and all accounts adequately settled. In total, this process can take 1-2 years to complete in some cases.
The only way that the probate process can be avoided is by having joint accounts and through the use of a trust and naming beneficiaries. Otherwise, the probate process will take place.
Which Document Is Right for You?
The COVID-19 pandemic complicates the answer to this question. A will can be a good option in an emergency. Wills can be set up faster and don’t require assets to be retitled the way a trust does.
What’s more, during the current lockdown, many banks in states around the country are shut down. This can make it challenging to retitle accounts and other assets to the trust. It can be done; you will likely just need more professional guidance.
While anyone can benefit from one, a trust can be a particularly good option for people who have assets of $150,000 or higher. This can include a 401k, real estate, or other assets.
Want to learn more? Get in touch with us today.
Barry E. Haimo, Esq.
Strategic Planning With Purpose®
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