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  • Writer's pictureDoug MacGray

Deciding Between an Estate or Trust Plan: Understanding Your Future Planning Options

Planning for the future is essential, yet many of us postpone making these crucial decisions because we're either unsure where to start or we don't think it's necessary just yet. One of the most common questions people have when they begin to think about planning for their future is, "Do I need an estate plan or a trust?" The solution isn't always clear-cut, as it depends on personal circumstances, objectives, and the complexities of one's financial situation.


Understanding Estate Plans

An estate plan is a comprehensive approach to managing your assets during your lifetime and distributing them upon your death. It typically includes a will, durable power of attorney, and healthcare directives. An estate plan does more than just outline who receives your assets; it also includes important instructions for your care if you become incapacitated, and can have provisions for guardianship if you have minor children.

Benefits of Having an Estate Plan:

  • Control Over Asset Distribution: You decide who receives your assets and when they receive them.

  • Protection for Loved Ones: Ensures that minor children or dependents with special needs are cared for by the people you trust.

  • Avoids Probate: Although not entirely, a well-structured estate plan can minimize the assets going through probate, saving time, money, and privacy.


Trusts Explained

A trust is a legal arrangement where one party, known as the trustee, holds and manages assets for another party, the beneficiary. Trusts can be established for various reasons, including estate tax reduction, asset protection, and providing for a disabled family member. There are different types of trusts, but they are generally categorized into two: revocable trusts, which can be altered or terminated by the grantor at any time, and irrevocable trusts, which cannot be changed once they are executed.

Benefits of a Trust:

  • Avoids Probate Entirely: Assets held in a trust do not go through probate, allowing for a faster and private transfer of assets.

  • Greater Control Over Asset Distribution: Trusts can be specifically tailored to control when and how your beneficiaries receive their inheritance. This is particularly useful for minors or beneficiaries who may not handle a lump sum inheritance responsibly.

  • Can Offer Tax Advantages: Especially with irrevocable trusts, where the assets no longer belong to the grantor, thereby possibly reducing the estate tax burden.


Estate Plan or Trust: Which One Do You Need?

The choice between creating an estate plan or setting up a trust depends on your personal circumstances, including the size of your estate, your objectives, and the level of control you wish to maintain over your assets after your death.

  • For Simpler Estates: If you have a straightforward, smaller estate, an estate plan that includes a will may suffice. It's a simpler process and generally less costly to set up than a trust.

  • For Larger, More Complex Estates: If your estate is large and includes various types of assets, a trust could be more appropriate. It offers more flexibility in how your assets are distributed and can provide significant tax benefits.

  • Privacy Concerns: If maintaining privacy is important to you, a trust is beneficial since it avoids probate, which is a public process.


Ultimately, many people find that a combination of both an estate plan and a trust best serves their needs. The estate plan can cover general instructions and include healthcare directives and a power of attorney, while a trust can manage specific assets or situations.


Taking the Next Step

Deciding between an estate plan and a trust, or determining if you need both, requires careful consideration of your current financial situation, your future goals, and the needs of your beneficiaries. Consulting with an experienced estate planning attorney is invaluable in this process. They can provide personalized advice based on your unique situation and help you create a plan that ensures your wishes are honored, and your loved ones are taken care of in the future. For more personalized advice, consider reaching out to Stonecrop Advisors by contacting them at info@stonecropadvisors.com. Remember, it's never too early to start planning for the future. By taking the time now to understand your options and make informed decisions, you can save yourself—and your family—a lot of time, effort, and uncertainty down the line.

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