Having a high net worth is a great position in our society. It’s a coveted situation, and it’s a place we all aspire to be. Like anything in life, however, it has its drawbacks.
Possessing a high net worth often comes with complicated decisions. It’s not always easy to simply divide your money into one bracket or another. Divorce, for instance, can be very complicated, as it takes time to claim appropriate ownership and achieve a fair split.
This complication also applies to estate planning. You have several choices to make, and it may be necessary to utilize various methods to achieve your goals.
When deciding how to pass your assets along after death, you have two major options: a will or a trust. If you have a high net worth, here are some things to consider when deciding on which option is better.
Overview of How Wills and Trusts Work
Broadly speaking, a will passes along all your assets at once. The process, however, can take some time. First, your estate must go through probate. In this process, the estate’s executor first settles the deceased’s leftover debt.
Then, they go to work transferring property ownership. They cannot simply give beneficiaries an inheritance without first making that beneficiary the official owner. This process can take time, depending on the amount and type of property being transferred.
Trusts, on the other hand, operate as living financial entities. They can continue to grow, buy and sell property, make investments, and so on.
Using a trust, you can avoid probate. The trust becomes the owner of any property you put into it. Property transfers directly from the trust to its recipient, regardless of whether you are alive or dead.
What Are Your Family’s Needs?
You should consider how your death will impact your family. What will their immediate needs be? How much money will they need up front, and how soon do they need it?
Answering these questions should guide your decision. If your family will struggle in your absence, you must consider how to get money to them more quickly. In this case, a trust may help because it can avoid probate.
If your family can wait a little while, you could consider using a will. This will allow them to receive everything once probate is complete.
What Is Your Estate’s Growth Potential?
If your assets are just enough to benefit your immediate family during their lifetime, consider using a will. The will depletes your estate, giving your family everything and allowing them to use your wealth as needed.
If your estate could last into the future, a trust may be better. The trustee can make investments that add to your estate’s value, which can benefit your lineage for generations.
How Responsible Are Your Recipients?
It’s an uncomfortable, unfortunate reality, but some people can’t be trusted to manage large sums of money. Using a trust, you can create an allowance, controlling how much your beneficiaries receive. If necessary, you can give your trustee the power to cut someone off when necessary.
The trust could even help someone manage their money or create restrictions. For instance, it could demand that a certain recipient must maintain a full-time job to receive their allowance.
If your beneficiaries are responsible, and you aren’t worried about their future, you could choose a will. Receiving a large chunk of money could even enable them to invest and create their own wealth.
Using Both a Will and a Trust
Ultimately, you don’t have to choose just one. You can have both a will and a trust. Perhaps there is a friend you want to leave some money, but you don’t want them as a permanent part of the estate. Maybe there is a very specific item, like a car, you want to leave to someone. A will can manage these transactions. You can put the rest of your assets into the estate, allowing your immediate family access.
Really, there are few restrictions on what you can do with your estate. Make sure to work closely with your attorney. Tell them exactly what your vision is for the future, and they can help you craft a plan to fulfill your wishes.
Our firm is here to help with high-net-worth estate planning. For a consultation, call us today at (702) 904-9898 or contact us online.