At first glance, estate planning can seem like a long, complex, drawn-out process full of daunting decisions. And when you’re happy, healthy, and looking forward to the years to come, your end-of-life plan is probably the last thing you want to talk about with your financial advisor and family.

We get it. Estate planning may feel like a weighty process. But wills and trusts can be some of your most powerful tools for creating financial security—for your immediate family, and the generations to come.

If you’re unsure of the best will or trust structure for your family, the overviews below can help clear up the key differences between these estate plan components. And if you have questions about your personal estate plan, feel free to schedule a free intro call with our team. 

Living Wills

The first type of estate plan document you may choose to prepare is a living will. A living will is also often referred to as an advance healthcare directive. 

This legal document lays out your wishes for medical treatment if you’re unable to communicate those desires yourself. Unlike a last will and testament, which focuses on how your property will be distributed after your end-of-life, a living will doesn’t include references to your assets. This document ensures your medical preferences are honored, providing you and your family with greater peace of mind during a difficult time. 

Last Will and Testament

Your last will and testament is a legal document that outlines how you wish to distribute your assets at the end of your life. It may also designate guardians for your children, if they’re minors—which a trust can’t do. 

Your will can be broad, distributing your main assets, property, and home among your beneficiaries. Or it can be detailed and specific, describing who should receive particular items, like your car, a family heirloom, or a pet. You may even choose to leave a portion of your assets to a charity. All of these instructions should be clearly defined in your last will. And most importantly, your will should be updated regularly to avoid these estate planning horror stories

A well-crafted will is the cornerstone of comprehensive estate plans, and the best way to minimize conflict and complications in the next stage of your legacy. 

Revocable Living Trusts

A revocable living trust is a popular estate planning tool many individuals establish as a way to maintain better control over their assets. Plus, these trusts are “revocable,” meaning they can be changed or dissolved at any time. 

One of the main advantages of a revocable living trust is that the assets included in the trust can avoid probate—the court-supervised process of distributing property after death. Not only can probate be lengthy and expensive, it’s public. For families that wish to keep their assets out of the public’s eye, a revocable living trust is a straightforward way to minimize complications and increase your privacy. 

A revocable living trust may also offer tax advantages to married couples, when structured correctly. While the trust itself doesn’t change your tax liability, there are exemptions available in some cases that can have a positive impact on your tax bill. 

Do you need a will, a trust, or both? Read The 6 Most Important Estate Planning Questions You Should Be Asking Now to find out. 

Irrevocable Trusts

An irrevocable trust is a trust that, once established, can’t be changed or dissolved without permission from the beneficiary. And while that loss of control may be concerning, irrevocable trusts can actually be a very effective way to preserve wealth for the next generation of your family. 

Irrevocable trusts protect your property by (in most cases) blocking them from legal judgments and debt collection. That means these assets are shielded if you’re sued. It also means these assets may not be exposed to estate taxes at your end-of-life. This could result in a smaller tax burden for your heirs. 

Which estate planning documents do you need?

The right estate planning documents for your situation depend on a few different factors, including your financial situation, estate size, family dynamics, long-term goals, and the type of assets you wish to pass down. 

If you’re unsure which documents are relevant for your estate, we recommend sitting down with your financial advisor to talk about your needs and goals. We know this process can feel overwhelming. But with the right team on your side, you can navigate estate planning with confidence—and protect your legacy in the process. 

At Cook Wealth, we make estate planning simple and tax-smart

To talk about your financial goals, set up a trust, or get a second opinion on your estate plan, book a free intro call with our team.