An important part of a successful retirement strategy is a well thought out estate plan. It will give you peace of mind to know that your assets will go to exactly who you want them to, without costly tax burdens, probate delays, and legal headaches.

For many retirees, a will can be enough to ensure their wishes are carried out. However, high net worth individuals have more complex estate planning needs, and may want to consider a trust.

We’ll break down whether a will or a trust makes more sense for your situation, and take a look at the pros and cons of each.

Is A Will Enough For High Net Worth Retirees?

A Last Will and Testament, or a will, is a fairly simple estate planning document that lays out what you want done with your assets and personal property when you pass away. This includes dividing it among surviving family members, being donated to charity, or any other wishes you may have.

The assets included in a will are usually required to go through probate. This is a legal process to make sure that there are no liens, taxes, or debts that need to be paid before the assets can be transferred.

A will is the most basic estate planning tool, and has several benefits and drawbacks.

Pros of a will:

• Low-cost and Stress-free: Wills are simple and relatively inexpensive to create.
• Executor Appointment: Wills allow you to appoint an executor, or a trusted person who will manage your estate.
• Asset Distribution: In a will, you specify exactly who will receive your assets and property, instead of relying on state laws.
• Flexibility: They are easy to update and change during your lifetime.

Cons of a will:

• Probate: Wills must go through probate, which can be expensive and time consuming for your beneficiaries.

• Lack of Privacy: Wills are public documents, so there is no privacy regarding your assets or beneficiaries.

• Potential for Disputes: A will can be easily contested, which can slow down the probate process and lead to legal fights.
• Limited Control: A will controls the division of assets, but offers no long-term property management or any conditions for inheritance.

If you do not have a large family or a complex estate, a will should be able to meet your needs. Wealthy individuals who require more privacy and protections may need at least one, or several, trusts to make sure their wishes are carried out properly. A comprehensive estate plan for a high net worth retiree will likely have both a will and one or more trusts.

At What Level Of Wealth Does A Trust Make Sense?

Whether or not you need a trust for your estate plan is less about how much money you have than how complicated your situation and goals are.

Here are some situations where a trust would make sense:

• You want to protect your estate from probate fees, federal estate taxes, creditors, or future mismanagement.
• You have a large family to distribute to and many different asset classes and property types to include.
• You are concerned about the privacy of your beneficiaries, or the possibility of claims from disgruntled family members.
• You want to control how your assets are used into the future, or set stipulations on inheritance.

Types Of Trusts For High Net Worth Estate Planning

Trusts are not one-size-fits-all. There are numerous different types of trusts, which high net worth individuals can use to align with their specific goals. The two most basic types of trusts are revocable and irrevocable.

• Revocable living trusts are a good starting point. These allow you to bypass the probate process, but they can still be changed after they are created. On the other hand, they do not protect your estate from taxes or creditors during your lifetime.
• Irrevocable trusts are an important tax-saving tool for estate planning. You give up control of the assets in the trust, but they are moved out of your taxable estate and are protected from creditors.

There are more specific types of trusts depending on your needs, including:

• Irrevocable life insurance trusts (ILIT) are irrevocable trusts that hold a life insurance policy, so it is not included in the taxable estate. This helps protect your beneficiaries.

• Charitable lead trusts provide donations to a charity for a period of time, after which remaining assets go to your beneficiaries.

• • Generation-Skipping Trusts (GSTs) bypass your children and go directly to your grandchildren.

• Grantor retained annuity trusts (GRAT) are irrevocable trusts that transfer appreciating assets (like stocks) to beneficiaries and minimize gift and estate taxes.

Is There A Downside To Having A Trust?

A trust gives wealthy individuals more control over their assets and allows them to bypass probate, but it is not without its own problems. Some of the main disadvantages of a trust include:

• Trusts can be costly to set up, and need to be funded by transferring your assets to the trust. There can also be ongoing management fees.
• Trusts can require a lot of administration and paperwork to set up and maintain into the future.
• If you set up an irrevocable trust, you cannot change the beneficiaries or terms.
• You may still need to set up a ‘pour-over’ will for any assets not included in the trust.

Depending on the size and complexity of your estate, the pros can still outweigh the cons to make sure your assets and beneficiaries are properly protected.

Have Questions About A Will Vs Trust For Your Estate?

It’s important to have a detailed estate plan so that the divisions of your assets aren’t left up to state laws. Wills and trusts both serve important roles in a complete estate plan, and a fiduciary financial planner can help you decide what makes the most sense for your situation. Contact Zynergy Retirement Planning today to learn more about high net worth estate planning.