Photo at Pixabay
It is so important to ensure you are taking care of yourself and your family financially as you get older. You might be unsure of which vehicle to use to protect your assets and preserve your legacy. Two main options to consider are using an estate or a trust. Both are main legal structures for transferring assets to your family and/or beneficiaries, but each work in very different ways. Let’s walk through each one to see which may be the right fit for you!
What’s an Estate?
When thinking of an estate, think of everything that solely you own at the point of your death. Estates are temporary, as they really consist of just a one-time distribution of your assets after you pass to your beneficiaries.
Estates are carried out either by using a Will or through a legal chain of inheritance. In a Will, you write instructions on how your estate should be distributed. If you choose to not write a Will, then your assets will be distributed through a chain of inheritance that is determined by state law. A crucial thing to understand about using an estate is that it is important to go through the process of writing a Will, so you can rest in peace knowing that your assets are being spread the way you would have wanted.
Another critical thing to understand about an estate is that before any of your beneficiaries can inherit your assets, the estate will be used to cover existing debts, estate taxes, and any costs, fines, or fees. Whatever is leftover after that point will be shared with your beneficiaries appropriately.
Using an estate can require several different potential costs like the use of a lawyer to finalize a Will, management of an executor to distribute the assets, or even a probate court judge for large estates.
What’s a Trust?
When using a trust, you are using it as a legal entity that holds and distributes assets according to certain conditions. Now, this may be confusing because this sounds like an estate, right? But there are some differences.
The person who creates the trust, or the “grantor,” is able to create conditions however they want, but a trust exists independently of those who created it and from those who receive anything from it. Basically, the assets actually belong to the trust itself until they are shared, instead of to the person who owns them prior to their death.
To create a trust, a grantor would create a pool of assets. You would then work with a third party, the “trustee(s),” to manage and oversee the trust. Finally, you would figure out who should receive assets from the trust based on certain terms and conditions. A key thing to understand is that your beneficiaries could receive money from the trust prior to your passing if that’s what you outlined in the terms.
To pay for the costs of using a trust, the trust would draw that money from itself. If the trust owner dies before the assets are distributed, the trust does not become part of their estate, but is instead its own legal entity.
Which one is right for me?
Both of these options can do very similar things for you in the long-run. One thing to consider is that you can use a trust to help pay for your assisted living or senior care, while an estate would just help pay off any debts after you pass. Additionally, a trust is meant to be semi-permanent and can be executed while you are still alive, while an estate is temporary and only is executed after you die.
If you are looking for a way to ensure that you can protect the distribution of your assets, but still use them to cover things like assisted living as you get older, you should highly consider creating a trust. If you do choose to go with the simple estate route, then you should definitely make sure to create a Will, so your assets are shared the way you intended.
Sandyside Senior Living
This information was provided by Sandyside Senior Living in White Lake, Michigan. Sandyside specializes in advanced care for seniors with dementia, Parkinson’s, and all age-related illness.
Interested in learning more about Sandyside Senior Living? Contact Sandyside online, or call at (248) 698-3700.
To get in touch with Sandyside Senior Living please complete the form below:
VISIT SANDYSIDE SENIOR LIVING TODAY
PHONE: (248) 698-3700