When you have an entry-level job and are getting by eating ramen every night, the idea of creating a will and trust can be ludicrous.
Believe or not, no matter how few assets you have, you still have an estate. To ensure your family handles your assets and wishes as you want, you need to create an estate plan based on your unique needs.
Why you need an estate plan when you’re young
While no one wants to consider their own mortality, accidents and tragedies do happen. It’s always smart to prepare for the worst and hope for the best.
If you were to die suddenly, an estate plan tells everyone your wishes and who gets your property. Without one, the state decides for you.
For example, say you promised your best friend a treasured piece of jewelry, but did not include it in a legally binding will. Without a will, there’s no guarantee she will actually get it.
The court will decide who has the best claim on it, and that usually falls to a close family member. Without written documentation, your friend has no recourse.
The difference between a living trust and will
People often combine a will and trust, but they are very different documents. You may only need a will depending on your situation, but many people benefit from having both.
A will is a written document, signed by witnesses, that explains how you want your property distributed if you pass away. They are revocable, so you can change or cancel portions of your will at any time. As you get married or purchase property, you can amend the will to cover the new changes.
Living trusts are quite different. Unlike a will, a living trust can provide guidance on how to handle things while you are still alive but incapacitated, as well as what to do after you die.
With a living trust, courts are not involved. You appoint a trustee to manage your trust for you, and they handle the distribution of your estate.
If you create a living trust, your family can avoid going to probate, a legal process that determines what happens to your assets after you’ve died. Your loved ones won’t have to wait months to get funds or valuables from your assets.
Without a living trust, the court has to sign off on your will through the probate process. The ordeal can eat up as much as five percent of your estate’s value.
If you are gravely injured, in a coma, or cannot care for yourself, a living trust allows someone else to handle your affairs. Otherwise, no one else can sign for you, even to appoint a caretaker or agree to procedures.
Having a will and trust prevents costly court fees with probate and other expenses. The process is much simpler with the documents in place and is gentler on grieving family members.
How to set up a will
Establishing a will and trust takes some time and money. You have many options when creating a will. There are will creation programs available for as little as $30, or you can do it through an online legal service for around $70.
Most people opt to work directly with a lawyer to draft their will. A skilled lawyer can walk you through the process and guide you, pointing out things you may have overlooked. This process can cost several hundred dollars, but their expertise can be invaluable.
How to set up a living trust
Living trusts are more complex than wills, making them more expensive to complete. You can create an online version for $249, which is a bargain compared to working directly with an attorney. If you hire a lawyer to create one for you, it can cost up to $1,500.
While working with a lawyer is not necessary, it’s helpful in certain situations. If you have a lot of debt, an attorney can provide advice on how to structure the trust to deal with creditors.
Additionally, if you want your gifts to family members to have conditions, such as only giving your nephew money if he goes to college, your lawyer can complete it for you.
While it’s tempting to go the do-it-yourself route to save money, your living trust is a significant investment in your well-being. It’s worth spending more to get the expertise and knowledge you need to handle your unique situation. Having an expert help you can give you peace of mind.
Create a will and trust
When you’re tight on money and building your career, the idea of spending money to create a will and trust can seem silly, but it’s a good idea to prepare for the future. Planning for the worst is not a fun concept, but it can be a significant help to your loved ones.
Start planning now for the unexpected to ensure a smoother process for your family. It’s one of the most generous gifts you can give them.
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