As we learn more about Prince’s estate, and the fallout from his lack of estate planning, we have an opportunity to make sure we have a plan for our legacies when we move on.
“There has been a lot of discussion about the fact that Prince didn’t have a will,â€ says Lori Anne Douglass, an estate-planning attorney at Moses & Singer in New York. “Estate plans can be tailored to anyone’s needs. A trust would have allowed him to protect his privacy. That information is private, whereas the content of wills is public,â€ she adds.
As for what’s right for you, keep in mind that a will is a document that allows you, the testator, to name who you want to manage your estate when you die, this is called the executor. It also allows you to direct how you want your property managed and distributed. More importantly, your will allows you to name who you want to act as the guardian for your minor children or other dependents. If you die without a will, you are what is called ‘intestate,’ and your estate will go into probate
A trust is an arrangement that allows a third party — a trustee — to hold assets on behalf of a beneficiary or beneficiaries.Â It’s essentially a document that spells out how you want the assets you have to be distributed to your beneficiaries. Trusts also allow you to avoid probate and can help keep harmony in your family.
Don’t buy into the belief that trusts are only for the wealthy. Many financial advisers say a good rule of thumb is that you should consider a trust if you have assets of $100,000 or more.
As with the other documents you’ve created for your estate plan, one of the most important factors in creating a trust is determining who you will want for a trustee. Your trustee is going to manage the funds, invest the asset, make distributions, and possibly have to file a tax return every year for the life of the trust. Â Make sure you select someone who is reliable; it’s a tremendous responsibility.
You may also consider a trust depending on your family’s needs. If you have a special needs child or an elderly parent, creating a trust for their benefits could impact whether they qualify for government benefits. If you put $50k in a trust for your mother, for example, the government could consider that money as part of your mother’s assets, which could disqualify her from eligibility for Medicare benefits.
There are different types of trusts for different purposes, which is why you should always talk to an estates attorney as part of your planning.