Having an estate plan is always a good idea. Even young people need an estate plan. This is because you never know when something is going to happen to you. An estate plan will organize your estate so that if something were to happen to you, there would be someone named to care for your minor children, and there would be instructions on how to divide the assets. However, there are some things that you don't need to include in an estate plan. Here are couple things that you generally don't put in a will or trust.
If you have life insurance policy, you might be wondering if you need to title that policy into the name of the trust. Although this is an option, most people decide to leave the life insurance policy out of the trust. This is because a life insurance already bypasses probate. Once you die, the beneficiary of your life insurance policy will receive that money upon your death.
This is important because your loved one may need the life insurance policy to pay for funeral costs, medical bills, housing, food etc. You want your loved ones to have as much flexibility with the life insurance policy, and it is already designed to be paid on death.
401K and IRA
If you have a 401K, you don't need to put that in a trust. There will be a beneficiary put on the trust. In most cases it is your spouse. Then if you pass away, it will be put in your spouses name. If your spouse has already preceded you in death, then the funds in the 401K will pass to your children.
This is the same for your IRA. It is in your name until you pass, then it will first pass to your spouse, then to your children.
The reason it is best to keep these out of a trust is that there a special terms on retirement plans that allow your children to roll over the funds into their own retirement plans. For example, say that you have a child who doesn't want the funds right away; they can declare it into a rollover account and they can continue gaining the interest on the account. Or they can take the money.
If you put the money in a trust, your children no longer have the option to choose to put it into a rollover. The money will just be put in the trust and then divided equally among the beneficiaries of the trust.
By understanding what things shouldn't go in a trust, you can be sure to have the best protection possible. For more information, contact a firm such as Cadwallader Law Offices.