It’s fair to say that we are living in a new age of uncertainty with the COVID-19 pandemic. Concerns over the pandemic have ‘led to a skyrocketing demand for wills, even among those who aren’t senior citizens,’ according to an ABC News report.
None of us wants to imagine the worse future but now in current scenario it’s preferable to consider both positive and negative aspect and do proper estate planning. Normally when we mention estate planning it is considered as written will or getting will register but there are other option as well for estate planning. Let’s look into the two main methods of ESTATE PLANNING.
Before proceeding, let’s make estate planning clear to you all.
“Estate planning in simple terms refers to the passing assets / investments down from one generation to another. You decide how much of your estate – be it property(s), car(s), personal accolades, financial investments, etc. – you want to pass on to whom and how, after your demise.”
There are two methods of Estate Planning:-
1. Will
2. Trust
WILL
As the name suggest Will meaning Wish. In legal terminology, will means a document that expresses the last wishes of a person. The person who created the will is known as a testator. A will contain a declaration of the testator, regarding the management and distribution of his personal estate. A will in Indian terminology is “VASIYAT” prepared generally by us, mentioning the ways of transfer of assets to the next generation, family members, spouse etc. The will comes to effect after the death of the proprietor.
TRUST
A trust is defined as a legal arrangement, in which the trust owner authorizes a person called a trustee, to hold the asset, for the benefit of a third party called the beneficiary. It allows a person to nominate beneficiaries of his assets, before or after he passes away. There is no requirement of court interference in trust case and also it is created with intention of reduce tax liability.
Which estate planning method to choose?
It depends on certain criteria. Let’s get into it-
- Regardless of your net worth, if you foresee the need to plan in case of mental incapacity even if your asset is in sole name then a person should choose trust. Since one of the requirement of will is that it should be created with sound mind.
- The largest asset young parents have is wither life insurance policy or retirement amount. If any of the parent died or separated, and they want to name their property to the child then they should go for the trust. In trust the trustee will hold the asset instead of the guardian and mention clause to receive inheritance to children when they attend legal age.
- In case of single person having property in sole name should go for revocable trust. The two benefit of such would be- it will keep your asset out of court-supervised guardian and to allow your beneficiaries to avoid the costs and hassles of probate. But if cost of creation of trust surpasses the asset value then it better to choose will.
- A last will and testament that is filed with the probate court becomes a public court record that anyone can read. Contrast this with a revocable living trust, which is a private contract between you as the trust maker and you as the trustee. If a person have privacy concern then go for trust.
- The cost of creating trust is more than the will, thus if want to go for relatively simple and cost cutting approach then will is the way to go. Also the trust have to keep funded thus person holding large assets should go for it. Rest should choose will as the option.
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