7 Crucial Factors to Consider Before Drafting a Trust or Will

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Creating a trust or will is a significant step in planning for the future and ensuring your wishes are honored. Here are five crucial factors to consider before drafting these essential documents:

1. Addressing Children of Different Ages and Backgrounds

When planning your estate, consider all children involved, whether they are biological, adopted, or from current or past relationships. It’s advisable to distribute assets based on age rather than conditional requirements such as marriage, having children, or graduating college. This approach simplifies the process and avoids potential complications. For example, you might distribute 25% of the estate at age 18, another 25% at age 25, and the remainder at age 30. This method ensures a fair and straightforward distribution.

Fairness2. Ensuring Fairness in Distribution

Estate divisions are often not equal, reflecting the plan creator’s understanding of each relationship. It’s essential to include detailed explanations in the legal documents for any disparities. This transparency helps heirs understand your decisions and reduces the potential for disputes. Specify why you are making particular choices, going beyond the legal requirements to ensure clarity and fairness.

3. Compensating the Executor

Consider including a provision for compensating the executor, either through a one-time payment or an hourly/monthly plan. Executors shoulder significant responsibilities, and fair

compensation acknowledges their effort. You can also include an option allowing the executor to accept or decline this compensation. For more details, refer to our separate blog post on choosing an executor.

Children4. Creating a Secondary Trust for Children

A secondary trust, triggered by your death, can be beneficial for the children of the estate. Include specific investment language that limits investments to short-term AAA U.S. Treasuries or money market funds. This strategy ensures that the funds will be available when the child reaches the appropriate age. Once the child receives the funds, they can manage them independently, relieving the executor of ongoing responsibility.

5. Sharing the Contents of the Trust

Decide whether you are willing to share the contents of the trust with those mentioned in the document while you are still alive. If you choose not to, ensure that everything is well-documented and securely stored. Make these documents accessible to your lawyer and executor to prevent any issues or confusion after your passing.

6. Transparency with Financial Accounts

If you have secret or special savings accounts, understand that these could become major headaches if not titled correctly or easily discovered by the executor. Transparency in your financial planning will prevent unnecessary complications and ensure all assets are accounted for.

Protecting Valuables7. Including a Living Will

A living will, also known as an Advanced Health Care Directive, is crucial. This document specifies your wishes regarding medical treatment if you become incapacitated. Without it, a family member might make life-and-death decisions based on financial motivations. For more information, refer to our separate article on this topic.

By considering these factors, you can create a comprehensive and effective trust or will, ensuring your wishes are honored and minimizing potential disputes among heirs.

 

Ian Goldey, the author of this article, brings over three decades of experience as a private wealth manager, assisting families with their financial planning. He has applied this extensive knowledge, along with his partners to create WhenIDie.com, a digital platform that simplifies the entire process of death planning and more. Try it free for 30- days. Apply this code 2024BLG15 for a 15% discount!

 

Legal Disclaimer

The information provided in this blog is for general informational purposes only and is not intended to be tax, legal, or financial advice. Readers should not act upon this information without seeking professional counsel tailored to their individual circumstances. While we strive to ensure the accuracy and reliability of the information presented, we make no representations or warranties regarding its completeness, accuracy, or current applicability. The use of this blog does not create an attorney-client or accountant-client relationship. For personalized advice, please consult a licensed attorney, tax advisor, or financial professional.

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