Living Trusts vs. Wills – What’s The Difference?

Living Trusts vs. Wills – What’s The Difference?

Do you know the difference between a will and a trust?

You’ve probably heard these terms but do you know what sets them apart and whether you need to have both? As we mentioned before, your will is a part of your estate plan. The same can be said for the trust, but each of them serve different purposes.

What Is a Will?
A will can be defined as a document in which you state your wishes and decide how your property will be distributed after you die.  The will is revocable and you are able to alter it at any time prior to your death. It’s always very important to review your will periodically and especially in the event of a major life event, such as marriage or divorce.

What Is a Living Trust?
Unlike a will, a trust or living trust not only specifies what’s to be done with your property after your death but how it should be dealt with during your lifetime as well. You’re able to appoint a trustee and, in the case of disability or illness, this person will be able to manage your property.

Perhaps the most important attribute of living trusts is that your estate will usually not need to go through probate. A caveat is that you must be careful to have everything accounted for in the trust or that portion of the estate will still require probate. Be sure to look into using a ‘pour-over’ will to direct any external assets into the trust in the event of your death.

What is the difference?
The easiest way to explain the difference is to show you what it is included in each. We found a great comparison from Nolo.

Do you need only one or both?
Each and every case should be looked at individually hence the best advice is to discuss it with your estate planning attorney.

By establishing a trust you can avoid probate. You can learn more about probate here. Having a trust is also a good idea when you have minor children because a trust allows you to establish provisions specifying when a child will be entitled to any assets held in trust.

You can set up a trust with tax planning provisions if your estate exceeds the current estate tax threshold. You can find your state`s current estate tax here.

Whether you have a will, a trust, or both, don`t forget that you can safely store them in AfterVault.com so your family can find them when they most need your vital information.

Disclaimer: We are not lawyers. Please talk to your lawyer if you have any questions or doubts about your situation.

Less Than 25% Of Australians Have An Up-To-Date Will

Less Than 25% Of Australians Have An Up-To-Date Will

Not long ago we talked about the fact that only 42 percent of U.S. adults currently have estate planning documents such as a will or living trust.. The situation in Australia is quite similar with only 55% of adults having a will.

In this article we’d like to highlight some of the most important findings from a report prepared by Charles Sturt University and The University of Adelaide called “Estate Planning in Australia or: it will never happen to me”. You can find the full report here.

Do you have a current up-to-date will?
44.90% of the respondents do not have a will. Of the other 55% that do have one, only 24% have an up-to-date will. As discussed in one of our previous articles having an outdated will is one of the top estate planning mistakes.

Have you discussed your will?
It’s a positive sign that almost everyone has discussed their will with spouse, partner or  family, considering the difficulty of this conversation.

Have you created a pre-paid funeral plan?
Only 13.70% have created a pre-paid funeral plan. This low number might be due to the fact people don’t realize that the funeral could cost to your family up to $20,000.

Do you have Life Insurance?
It’s interesting to note that, according to the report, “individuals in a relationship, with children, and a higher disposable income are more likely to have life insurance.” If you’re one of the 36% that have a life insurance or are planning to have one we recommend to make sure your family will be able to find your life insurance information.  This advice is based on our previous research where we found that “millions of families (yes, millions!) have lost billions of dollars”.

Online Assets
Even though the table below shows that almost everyone possesses online assets, only 28% know what will happen to their online assets in the event of incapacitation or death. If you are among the other 72% we advise you to take care of your online assets. You can download our free “Digital Estate Planning Checklist”  from here.

 

Have you prepared a Formal Succession plan?
As we have noted in one of our articles, estate planning is even more essential for business owners. In fact, your business insurance might even require that you have some sort of plan in place to ensure that your business can continue even if you are gone. And by putting your affairs in order you can best protect both your family and your business.

According to the research paper less than 26% of business owners have prepared a succession plan.

 

 

We hope this article was helpful!

And don`t forget that you can safely store all of your estate planning documents in AfterVault.com so your family can find them when they most need your vital information.

Disclaimer: We are not lawyers. Please talk to your lawyer if you have any questions or doubts about your situation.

Probate – What You Need To Know

Probate – What You Need To Know

Estate planning is a complex matter with lots of uncommon and hard to grasp words. An example is the word ‘probate’. Do you know what it is, how long it takes, and if you can avoid it? In this article we’ll share our knowledge on this topic.

What is probate?
Simply put, probate is the process where the will of a deceased is proven in a court of law and accepted as a valid document. This is the first necessary step of administering the estate of a deceased person. When the will is proven as valid, the executor receives the letter of probate from the court.

Do you need to go through probate if there is a will?
Most wills will be subject to probate. Almost the only cases when probate is not needed is when there are no significant assets in the estate or those asset have already been transferred, for example in a trust. For this reason, we strongly recommend seeing if a living trust is a good option for you.

How long does probate take?
The process can take anywhere from six months to two years to complete. The factors that will influence the time period are the size of the estate and if there are any assets that require special attention.   

What types of assets are subject to probate?
The assets subject to probate are those that are owned solely in the name of the deceased person, such as real estate or vehicles.  Retirement accounts, life insurance proceeds, property held in a living trust, or funds in a payable-on-death (POD) bank account are not subject to a probate.

How do you avoid probate?
Yes, it is possible to avoid probate and there are four ways to transfer your property without going through the process. The ways are:

– Joint Property Ownership
– Death Beneficiaries
– Revocable Living Trusts
– Gifts

Additional useful resource:
Finally to make sure you have a better understanding about the probate process, here’s a great infographic:

Don`t forget to safely store all of your estate planning documents in AfterVault.com so your family can find them when they most need your vital information.

Disclaimer: We are not lawyers. Please talk to your lawyer if you have any questions or doubts about your situation.

How To Protect Your Important Documents During A Natural Disaster

How To Protect Your Important Documents During A Natural Disaster

Unfortunately, natural disasters a part of our lives and we will usually have little to no warning before they strike. This year was no exception, with the wildfires in California destroying more than 600 homes and Hurricane Lane in Hawaii forcing people to evacuate their properties. Additionally, climate change might very well cause a dramatic increase in natural disasters in the very near future.

When a natural disaster strikes, people often lose not only their homes but also all of their important documents, photos, and sentimental mementos. These losses are often unrecoverable and nearly always cause serious hardship.

Take a look at the map below. It shows the disaster zones based on the total number of natural disasters from 1995 to 2015.

Why this is important?
Since 1995 the total number of disasters in the United Sates alone is 472. Clearly, if you are located there you must consider taking care of your documents as the chances of losing them due to the natural disaster is high.

How to protect my documents?
First of all make sure you have copied or scanned everything important. You can put it all in a safe or safety deposit box, but in many cases even that will not be sufficient. Fire, earthquakes, and floods are all likely to destroy everything in your area. The best solution is to upload your documents into an online secure vault such as AfterVault. This way your vital documents, photos, videos and memories will be safe and you’ll be able to access them from anywhere.

With AfterVault you can use your phone, take a picture of the document and upload it. This will not only save you time, but also will give you the comfort of knowing that you’re prepared.

What if someone gets my documents?
We at AfterVault are aware of how important the security of our system is. That is why we closely follow the very highest value security practises. All AfterVault user data is encrypted using AES-256 which is as strong as any known encryption specification. AES-256 has been adopted by the U. S. government and is approved for use to convey top secret information by the NSA.

Make sure you take care of your vital documents. Don’t wait for the disaster to strike. It will take you just an hour or two to put your affairs in order. People rarely realize the risk and the consequences of losing their important documents. Safely store them in AfterVault.com, so you and your family can find them when you need that information the most.

 

Top Estate Planning Mistakes : Relying Only On A Will

Top Estate Planning Mistakes : Relying Only On A Will

In our previous article we discussed what can go wrong if you don’t update your will. In this article we look at another major estate planning mistake. If you think that having a will means that your estate planning is complete, then you are wrong.

On the image below you can see what is the difference between estate planning and standard will.  For even more details, you can check out our article (Standard Will vs. Estate Planning : What is the difference?)

Standard Will vs. Estate Planning : What is the difference?

You can’t rely solely on a will
Unfortunately, the things are not that simple when it comes to getting your affairs in order. You need to consider different aspects that are not covered in your will. There are few key documents you need to take care of as well. In this article we will focus on two of them – power of attorney and advance medical directive.

Power of attorney
A power of attorney (POA) is a document in which you appoint a person or organization to manage your affairs if you become unable to do so. For example if you have been diagnosed with any serious disease and you are not able to manage your affairs, then the appointed person will do in instead. There are different types of POA which we will discuss in one of our future articles.

Advance medical directive
The advance medical directive is a term that refers to several different documents, but the most common one is the living will.

According to the AARP “A living will alerts medical professionals and your family to the treatments you want to receive or refuse. In most states this document only goes into effect if you meet specific medical criteria and are unable to make decisions”

If you don’t have a living will the doctors might take decisions that you wouldn’t agree on.

What can go wrong?
If you miss taking care of these documents, you would not be able to decides who to act for you. The court will appoint someone, that you wouldn’t have selected.

Don`t forget to safely store all of your estate planning documents in AfterVault.com, so your family can find them when they need it the most.

How Does Divorce Affect Your Will?

How Does Divorce Affect Your Will?

In our previous article we talked about how important it is to make sure we update our will every time an certain big life event happens. Having an outdated will can be one of the top estate planning mistakes most of us make.

Marriage and divorce are two of the biggest big life events that will affect your will so let’s talk about the most important points to consider when these events happen.

How Does Marriage Affect Your Will?
You found your perfect match and after the long and exciting journey to your wedding, you are now officially husband and wife. After the big ‘Yes!’, your will and testament will be automatically revoked, hence it will become no longer valid and you will need to create a new will.

How Does Divorce Affect Your Will?
If my will is revoked when I get married, will the same happen if I get divorced?
Yes, this is the case in most states. Your existing will and testament becomes invalid. After the divorce any bequests to the former spouse are automatically revoked.

Although laws differ between states, let’s take a look at what California law states :

“Unless the will expressly provides otherwise, if after executing a will the testator’s marriage is dissolved or annulled, the dissolution or annulment revokes … any disposition or appointment of property made by the will to the former spouse.”

Our advice is to contact your estate planning attorney after your divorce to be sure about the laws of your state. In some states, gifts to relatives of the former spouse, such as a stepchildren, are also revoked by divorce.

In any case, after a divorce the smart choice is to create a new will. If you decide that you still want your ex-spouse to be a beneficiary, you must expressly state this.

My ex-wife and I have Mutual Wills, do the same rules apply?
This might turn out to be a bit of an issue. Usually, revoking or changing any of the terms of the will requires the consent of all parties. If you drew up a Mutual Will, be sure to contact your estate planning attorney for advice.

How Does Remarriage Affect Your Will?
If you haven`t revoked or amended the will after the divorce, when you remarry your ex spouse, any previously made provisions related to her or him will be automatically reinstated.

And finally, don`t forget to upload your updated will to your secure vault or to change your beneficiary. If you still don`t have an account in AfterVault.com, then right now is the best time to create one. Here you can safely store your vital information and make sure your family and loved ones are taken care of.

Disclaimer: We are not lawyers. Please talk to your lawyer if you have any questions or doubts about your situation.