Did you know that Baby Boomers will pass down an estimated $68 trillion in wealth in the coming decades1? You’ve worked hard for your money and likely want to see it passed down in the most efficient way possible for your loved one’s benefit. Unfortunately, costly mistakes are all too easy to make. Understand the basics first, and then create an estate plan.
A Will vs. a Trust
Wills and trusts are both important estate planning tools with important differences. A will ensures property is distributed after your passing, according to your wishes, while a trust goes into effect as soon as you create it. A trust allows a trustee to hold legal title and property for a beneficiary and can have certain terms and conditions attached. In the case of a revocable trust, the trustor maintains ownership of property held in the trust while alive. When the trustor passes away, the trust does not go through probate, whereas a will would.2
Know the Rules for Passing on Your Assets
Many people may not know that their will does not control who inherits all of their assets, such as retirement accounts, life insurance, and annuities. In order to pass these on, you must name a beneficiary for each retirement account, insurance policy, and annuity. If you don’t, these assets will likely be paid to your probate estate, possibly triggering income tax. Believe it or not, some people incorrectly name beneficiaries; don’t forget to distinguish family members of the same name with signifiers like Sr. and Jr. There could be other reasons to update your retirement account beneficiaries, such as marriage, divorce, or the birth of a new child or grandchild.
Communicate, Communicate, Communicate
Communication is crucial when preparing heirs to inherit wealth, and this includes discussing what they plan to do with the money. While it’s good for younger generations to educate themselves on their finances, they may run into trouble when investing on their own and fail to understand the complexities of diversification and rebalancing. Whether you have a will or a trust, it’s also important to explain why you’re making the decisions you are. In the case of a trust, make sure your loved ones understand the terms of the trust and who the trustee is.
We can help you create a comprehensive retirement plan where your retirement income plan, tax minimization strategy, and estate plan all work together. Get in touch with us to find out how we can help you create a financial plan for your retirement and the future. Call our office at (435)773-9444 and schedule a time to talk with us about your estate planning and retirement needs.
Sources:
- What the Coming $68 Trillion Great Wealth Transfer Means for Financial Advisors
- Will vs. Trust: What’s the Difference?
Disclosure:
Investment advice is offered through APO Financial Services, LLC (“APO”) 10155 Westmoor Drive, Suite 175, Westminster, Colorado 80021-2627. APO Financial Services is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration with the SEC as an investment adviser should not be construed to imply that the SEC has approved or endorsed qualifications or the services Eric Scott Financial and/or APO Financial Services offers, or that its personnel possess a particular level of skill, expertise or training. Additional information pertaining to APO’s registration status, its business operations, services and fees, and its current written disclosure statement is available on the SECs Investment Adviser public website at https://apofinancial.com/disclosure/.
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