A will and trust gives you the opportunity to determine who will inherit your property rather than leaving the decision to state law. People who have modest estates are often the ones who most need a will and trust — both allow for an appropriate transfer of property at death.
A will lets you choose who will represent your estate; with no will, a representative is chosen by the court and the cost is procured from your estate. If you die leaving a spouse and children, the court generally splits your estate between them; if you die without any children, then the court splits your estate between your relatives. Wills are important for parents with minor children — in a will, the parents can designate their children’s guardian. Without a will, a guardian will be chosen by the court.
You can make adjustments to your will at any time; and it is very important to make amendments if your marital status changes. At the same time, you should review the beneficiaries for your 401(k), IRA, pension and life insurance policy since those accounts will belong to your chosen beneficiaries when you die.
A trust lets you decide how your accounts are allocated. While a will deals with the grand total of your estate, a trust deals with specific accounts, such as your life insurance policy and properties.
People often have a living trust, which is created by the settlor when he/she is living. Living trusts allow the settlor’s estate to be transferred to an heir without going through probate, the process of establishing the validity of a will. If you have a living trust, then you still need a pour-over will. A pour-over will allows for your estate and assets to be transferred to your heir(s), even if you failed to re-title assets and amend your will after death.
Assets that are not correctly named in the trust often go through probate. If this happens, then the beneficiaries of those accounts might be relatives you wouldn’t have chosen.
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