You want to protect your beneficiaries and your estate when you pass away, and you know a will is one way to do that. Another possibility is to have a will and trust, which determine where your assets go while also protecting them after death.
Trusts are documents that are legally binding. They give a trustee the authorization to manage and control assets within the trust. When you’re alive, you can choose to stay as the trustee, or you can appoint someone else to be the trustee of the trust. You are able to revise it at any time until your death.
There are a few things to know about using a living revocable trust. Here are just three that you should consider.
1. You have more financial protection
When you have a bank account, you usually have Federal Deposit Insurance Corporation support. That means that the FDIC will protect your assets up to a certain amount in that account. Normally, it’s around $250,000. It’s a good idea to use a trust if you plan to have more assets than that, because you’ll have increased FDIC protection. Each person you name as a beneficiary raises the amount of protection by an additional $250,000, and you can protect up to $1,250,000 in total in this way.
2. You still need a will
A trust is a great way to make sure your will is followed, but a will is still necessary. A will does more to protect your beneficiaries than a trust. For example, in a will, you can state that a creditor only has three years to claim compensation out of your estate’s funds. Without a will, you can’t do that. A will also helps you name guardians to your children, if they’re minors and can point out other wishes you have.
3. Trustees can cost less than executors
This certainly isn’t always the case, but trustees can be less expensive than executors. If someone in your family is a trustee, he or she may charge you less or nothing at all to take care of your trusts. If you use a professional, then the cost is also typically less at around 1 percent of the total assets. For executors, the total fee could be up to 5 percent of the assets you own.
These are just a few things to think about when you’re starting your state plan. Your attorney can help you make sure your assets are guarded well.