What Type of Estate Plan is Best for You?

Choose Wisely: The Type of Estate Plan Used Will Impact How Much Control and Protection You Can Exert Over Your Hard Earned Assets

You have worked hard for your money and carefully managed your assets. So it makes sense that you want to find the right balance to maximize control and protection of your assets upon your death. Even if you think you don’t, everyone has an estate and it is important to choose the proper planning mechanism to ensure your assets are distributed according to your wishes in an effective and efficient manner.

Key Takeaways 

  • It is important to consider all your options when designing your estate plan
  • Both Trust-Based and Will-Based Estate Plans have benefits and potential drawbacks that must be considered when deciding which one best suits your goals
  • Key factors to consider when choosing your estate plan are: cost, control of the distribution of your assets, protecting your beneficiaries from creditors and privacy of the process

Choosing the right type of estate plan maximizes peace of mind because you know your hard earned assets will be distributed according to your wishes and goals. At Schlau|Rogers, we'll create a custom comprehensive estate plan based on your individual needs, with two main types of estate plans: Will-Based estate plans and Living Trust-Based estate plans.  In a previous blog, I covered what a Will-Based plan is and why it is the right choice in certain situations.  In this blog, I will differentiate between the two types of plans as well as offer you some things to keep in mind when deciding which plan will best suit your needs.

WHAT DOCUMENTS ARE CONTAINED WITHIN EACH PLAN?

Both the Will-Based and Trust-Based plans will consist of the same ancillary documents that allow you to appoint individuals you trust to manage your assets and make important decisions in the event of incapacity or death.

     

    WILL-BASED PLAN

    • Last Will and Testament
    • Financial Power of Attorney
    • Advance Healthcare Directive
    • HIPAA Release Authorization
    • Living Will
     

    TRUST-BASED PLAN

    • Revocable Living Trust
    • Pour Over Will
    • Financial Power of Attorney
    • Advance Healthcare Directive
    • HIPAA Release Authorization
    • Living Will
    • Real Property Title Transfer Documents
     

     Schlau|Rogers, Your SMarter Estate Plan, california estate planning business attorney

    THE BENEFITS OF A WILL-BASED PLAN

    A Will-Based plan, otherwise known as a Last Will and Testament, serves a number of critical functions. A Will-Based plan:

    • Allows you to specify who you want to receive your hard earned assets upon your death
    • Allows you to name a guardian for your minor children (the only legal document in estate planning that will take of this)
    • Allows you to name a conservator to manage any assets you leave to your minor children
    • Allows you to appoint someone you trust to act as Executor, who will administer your estate (opening probate, gathering assets, distributing assets per the terms of the Will, dealing with the court, paying creditors, filing a final tax return, etc.)

    THE POTENTIAL DRAWBACKS OF A WILL-BASED PLAN

    A Will-Based plan also has some drawbacks that you need to keep in mind when deciding whether it is the right choice for you. For instance:

    • Your Will does not go into effect until your death, meaning that you are unable to plan for your incapacity, especially if your plan does not include both a financial and healthcare power of attorney
    • Less control over how and when your assets are distributed to your beneficiaries.  All property is distributed outright to beneficiaries over the age of 18.
    • Inability to protect your beneficiaries’ shares from creditors and predators
    • Requires Probate, which can be costly and has the potential to lead to family disputes or extensive litigation
    • Probate is a judicial process and therefore everything that takes place is public record and can be accessed by anyone

    THE BENEFITS OF A TRUST-BASED PLAN

    A Trust-Based plan spearheaded by a Revocable Living Trust is your alternative to a Will-Based plan. It can serve a number of functions:

    • Allows you to select beneficiaries to receive your assets upon your death
    • Allows you to enact your wishes and goals by controlling how and when your assets are distributed (i.e. for college, for medical expenses, at specific times or ages, upon certain achievements, etc.)
    • Allows you to protect your beneficiaries from creditors and predators
    • Depending on your goals, you have the option to structure your Trust in a way that will provide long-term wealth preservation and accumulation
    • If properly funded, you Trust will allow you to avoid Probate and therefore keeps your information private and confidential
    • Allows you to be prepared in the event of incapacity, as your successor Trustee will be able to manage your affairs if you are unable to do so yourself
    • Can be structured to minimize tax implications for your beneficiaries at your death
    • A comprehensive Trust-Based plan will also include a Pour-Over Will, so in the event that you fail to properly fund your Trust, that property will be "poured over" into your Will (although this will include Probate)

    POTENTIAL DRAWBACKS OF TRUST-BASED PLAN

    A Trust-Based plan, like it Will-Based counterpart, also has some drawbacks you should keep in mind when deciding whether it is the right choice for you. For instance:

    • A Trust must be be properly funded to be effective, and it is very common for people that choose Trust-Based plans to fail to properly fund their Trust
    • They are generally more expensive upfront because various issues are taken into account, including asset protection and accumulation, as well as income and estate taxes
    • Trust Administration can be costly depending on the complexity of your estate, especially if you employ a corporate fiduciary (a professional Fiduciary is an alternative)
    • Some estates qualify for a waiver of the Probate process, which makes a Will-Based plan more practical

    Deciding which plan is the right choice for you is important, and often can be difficult. At Schlau|Rogers we can offer you guidance in making that decision, and will weigh the pros and cons of choosing one over the other for your particular estate. In the end, we'll deliver your own Will-based or Trust-based estate plan to fit your individual needs. Call us today at (949) 873-0662 or get in touch to get started.

    If you'd like, click here to learn a little more more about Wills and Trusts. Remember to plan smarter!

    Joshua Rogers is a co-founding principal of Schlau|Rogers and an estate and business planning lawyer practicing in Orange, San Diego, Los Angeles and Riverside counties. He is an avid Lakers fan, blogger, aspiring scuba diver, and takes pride in helping others reach their goals.

    At Schlau|Rogers, we do more than just estate and business planning, probate and trust administration. Our objective is to provide individually-tailored plans that allow you the opportunity to reach your goals, all while minimizing headaches and risk, and maximizing peace of mind.

    On our blog, you'll find useful information about estate and business planning, probate and trust administration, as well as some tidbits on personal finance, taxes, and anything else we think will help minimize headaches, worry and risk, all while maximizing peace of mind.

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