Probate is a legal process that determines if someone’s will is valid

It’s not always clear whether a will or a trust is the best for an individual estate

While trusts are typically more expensive to set up than a will, they also help beneficiaries avoid specific types of taxes, depending on the type of trust. Wills typically go through probate, whereas trusts do not. An article offers a list of questions to consider when deciding between the two.

Revocable trusts are typically subject to estate taxes

Irrevocable trusts, however, are not. Both types help beneficiaries avoid probate, the lengthy court process that administers a person’s estate upon death.

Estate taxes are paid out of the estate, while inheritance taxes are paid by beneficiaries

When a person dies, any estate taxes owed are paid out of their finances before being transferred to their beneficiaries—unlike inheritance taxes that are paid by the beneficiaries themselves. In addition to a federal estate tax, 12 states and the District of Columbia have a state estate tax with varying rates.

Trusts offer ways to reduce the taxes beneficiaries pay on assets in one’s estate

People of different socioeconomic classes often decide to establish a trust to avoid certain taxes. When someone dies and leaves assets to beneficiaries in a will, those beneficiaries must pay specific taxes a trust's beneficiaries avoid. It all depends on the type of trust.

Certain trusts can bypass estate taxes—but the terms can't be changed

Putting money and other financial assets in an irrevocable trust is one way to avoid estate taxes. There are some cons to this trust, like the fact that you can't change the terms of the trust or assets in the trust after they're set. But a big pro is that any financial assets in an irrevocable trust aren't considered part of your estate, meaning they aren't subject to death taxes.

Trusts are estate planning tools

They’re used as a way to designate assets to beneficiaries while skirting certain taxes and maintaining one’s privacy. They can hold a wide range of assets, including cash, real estate, stocks, businesses, and more.

Death taxes are placed on a deceased person's estate

Death taxes can include liquid cash, property, stocks, or other financial assets they owned. There are two main types of death taxes in the US: the estate tax and inheritance tax. Death taxes are levied at the federal and state level, but are targeted towards the rich.

Only 5 states have inheritance taxes

Unlike estate taxes, inheritance taxes paid by the beneficiary of the estate (the person who inherits the deceased person's financial assets). The federal government doesn't levy an inheritance tax, but five states do. They all have varying tax rates and rules.

In a trust, the trustee is often the same person as the beneficiary

While a trustee is supposed to be a neutral third party whom the grantor appoints to manage their trust, they can be (and often are) the same person as the beneficiary. While that seems counterintuitive, trustees have a legal obligation to manage assets impartially and in the trust’s best interest.

How much tax you would owe on a $14M inheritance

“Death taxes” refer to estate and inheritance taxes—fees imposed on wealth transfers after someone passes. While the federal estate tax only applies to estates over $13.61 million in 2024, some states, like Washington, have their own taxes.

A revocable living trust is the most common type of trust

With a revocable trust, the grantor can alter or dissolve the trust at any time. A living trust, is one that the grantor creates during their lifetime (as compared to a “testamentary” trust, which a grantor establishes in their will to be read after death).

Revocable trusts are more flexible than irrevocable trusts

Irrevocable trusts are almost impossible for the grantor to change or dissolve. With a revocable trust, the grantor can alter or dissolve the trust at any time. However, there are upsides to irrevocable trusts, too—such as the fact that they’re typically not subject to estate taxes, unlike revocable trusts.

Contrary to popular belief, trusts aren’t only for the wealthy

Trust funds can be expensive to set up, given that their establishment often requires paying a lawyer for their time. But for many, that expense might be worth it depending on the complexity of the assets and the ability to specify when, where or how an estate’s assets are used.

When a pension holder dies, payments are sometimes passed on to a relative

Those relatives are often the pension holder’s surviving spouses or dependents. This article offers tips from a financial expert on how to make sure your spouse is taken care of during retirement, including navigating a pension’s ultimate destination.

The debate over estate taxes centers on wealth inequality

Since the modern federal estate tax was implemented, people have felt strongly about whether or not to keep it. Much of the debate boils down to equality: Proponents say the tax creates better income equality between the rich and poor, while opponents say it's an inequitable tax only placed on the wealthy.

If the estate tax is repealed, more expensive alternatives might come in its place

The federal estate tax has been up for political debate for decades. Many want to get rid of it altogether. If repealed other tax options, like capital gains taxes, could have people paying more in taxes than before.

Half of the richest people in the US are finding ways around death taxes

One of the main purposes of the federal estate tax is to crack down on generational wealth, so wealth isn't concentrated among a select few. However, the ultra-rich have found ways around paying these taxes. This ProPublica article investigates the practices used by half of the 100 richest people in the US to avoid death taxes.

A 'death benefit' can replace lost income, pay for a funeral, or leave a legacy

Those beneficiaries are usually family members. In exchange, the policyholder pays a monthly fee for coverage. It’s normally used to cover the life of a financial provider.

Estate planning involves organizing your financial documents—and making sure your family knows where to find them

This article offers tips for keeping yourself organized, such as the list of documents your family may need and suggestions for where to keep the files, both digital and physical.

Gifting money is one way to avoid death taxes

Gifting money while you're alive is one way people avoid estate and inheritance taxes. There is a yearly cap on how much you can give to a person before that money is taxed—but there isn't a cap on how many people you can give money to in a year.

You can draft a will designed to block AI resurrection—but the request may be ignored

Ars Technica spoke with legal experts about how—and if—people could design their wills to prevent AI resurrection. Though this is not yet a common request, one lawyer suggested that people worried about living on in an AI format can draft a power of attorney and a will that prevents those in charge of one's estate from submitting any texts, voice, image, writings, or other personal information to any AI tools.

Opponents of the federal estate tax began using the term 'death tax' in the 1940s to sway public opinion.

Special needs trusts help financially care for dependents with disabilities.

More than 15 states have estate or inheritance taxes—but Maryland is the only state with both

Eighteen states, and Washington, DC, have estate or inheritance taxes in place. Tax rates and thresholds vary per state, but most are less than the federal estate tax rate and threshold. This means an estate doesn't have to be as lucrative to be subjected to the taxes.

Historically, only about 1% to 2% of Americans had to pay the federal estate tax

Recent IRS data shows that between 2011-16, that number dropped even lower: The federal estate tax only impacts about 0.2% of Americans. Death taxes typically only impact the rich, and the federal estate tax is no exception.

Brush up on your bankruptcy vocab

The technical term for what happens when a court removes a debtor’s obligation to repay money owed is “discharge.” An “automatic stay” is what goes into place once a filing occurs to prevent a debtor from facing lawsuits, evictions, and other negative consequences until the process wraps up.

Both individuals and businesses can establish trusts

Business trusts can allow trustees to manage a beneficiary’s stake in a business, and more. There are many different specific types of business trusts.

How the wealthy are preparing for an estate tax clip

In 2017, the federal government passed a tax bill that raised the estate tax threshold for individuals and married couples. However, this exemption was temporary and is set to expire at the end of 2025. This Bloomberg Tax podcast episode explains what wealthy individuals are doing to protect their estates before the tax change. Listen here.

A prenup is a legal contract that allows couples to determine how their assets and debts will be divided in the event of divorce.

An online presence provides a means of grieving and honoring individuals after death

Shifting perspectives toward the increasing importance of digital profiles of the dead have made anticipatory management of one's digital legacy more critical. Experts suggest choosing a tech-savvy relative—such as a cousin—over a spouse to reduce confusion about what to preserve or discard, as well as how to access password-protected content.

Explore a visual of 16 different types of trusts

While all trusts fit into one of two categories (revocable or irrevocable), many other types of trusts exist for more specific circumstances. Think: pet trusts and special needs trusts.

7 things to know about inherited IRA rules

An inherited IRA is any kind of IRA or 401K plan you inherited from someone after they’ve died. Since there are different tax advantages for each type of retirement account, the rules you have to follow widely differ based on the account, your relationship to the deceased, and how you want to use the money. Here are the seven things you must know to navigate an inherited IRA.

Proof-of-work versus proof-of-stake: what's the difference?

The two main consensus mechanisms—the way blockchains confirm and enshrine information—are proof-of-stake and proof-of-work. An overview compares the differences between the two and the latter's ability to reduce the energy intensity of the computation process, which has emerged as one of the biggest criticisms of the crypto boom.

What is the unlimited marital deduction?

One big way to avoid paying several death taxes? Get married. The unlimited marital deduction allows an individual to grant all their financial assets to their spouse while they're alive or after they’ve died without having to pay the federal estate tax or gift tax. There are limitations to this rule. For instance, how it works with state death taxes. Learn more here.

For some debtors without assets that can be sold or returned, filing for bankruptcy can provide a path toward a clean slate

However, the bankruptcy process does not apply to several types of common debt, including money owed toward child support or alimony payments. Most debtors also do not qualify for relief from student loan payments.

A 1993 deal with the government exempts British Royals from paying inheritance taxes

When Queen Elizabeth II died, King Charles didn't have to pay any inheritance taxes on the money he received from his mother. That's because of a unique deal the royals made with the UK government in the 1990s, in an effort to preserve the assets of the royal family that are synonymous with the institution.

Bankruptcy is a legal way to manage overwhelming debt, whether for individuals, corporations, or even local governments

Chapter 7 is for liquidating personal assets to clear debts, Chapter 13 allows a repayment plan for individuals, and Chapter 11 lets businesses reorganize to stay afloat.

Filing for Chapter 7 bankruptcy can be complex

Debtors must know whether their liabilities are secured or unsecured and what type of assets they have. They also need to know what a filing can and can’t help them with.

A deed is a legal document that shows change of homeownership during a sale

A deed differs from a title, which is the actual right of ownership to a property, and a concept rather than a physical document. These days, many deeds are online rather than physical pieces of paper kept in a home.

A living will is a legal document spelling out your medical wishes for emergency care

This legal document makes it explicit if you want medical interventions in the event of an emergency, including CPR, feeding tubes, ventilator assistance to push air into your lungs to help you breathe, and more. Talking with your doctor about this is covered by Medicare.

Americans are projected to inherit $105T over the next 30 years

Today, someone's financial standing has more to do with their families than any other outside factor. Of the more than $100T of projected inheritance, that money is concentrated among a few wealthy estates and families.

Death taxes have helped fund wars since the 1860s

Death taxes date back to 700 BCE and were used in Ancient Rome and Ancient Egypt. In the US, they've been used to finance wars since the Civil War, and have been levied on both the estate and beneficiary. The estate tax created during WWI to help finance war efforts is still in effect today.

Life insurance policies and annuities are both contracts between individuals and insurance companies

But while life insurance policies are paid out only after an individual dies, annuities are intended to provide a steady income while the investor is still alive. Also, life insurance protects an investor's family in the event of their death, but an annuity helps protect an investor from outliving their retirement savings.

Final life insurance is most common for people over the age of 50

Final expense life insurance is a type of life insurance where, instead of paying a sum of money to your beneficiaries after death, the insurance covers the expenses for your funeral, burial, and any end-of-life care.

Escrow is when a third party holds on to the money during a financial negotiation between two other parties

In the homebuying process, escrow typically happens while the buyer and the seller negotiate the terms of the sale. Escrow accounts can also be used to hold a buyer’s money when making payments on their loan.

Life insurance can can cover funeral expenses, loss of income, and more

Life insurance can act as a financial safety net if your main financial provider dies. Among other things, it can cover any debts that were left behind. In this video, a Yahoo Finance contributor dives into why life insurance could be the key financial protection your family needs.

What are college endowments? An expert explains

College endowments are meant to last forever. That's why some of the oldest, most prestigious schools in the US have lasted so long. A higher education finance expert weighs in on how these funds work and offers fascinating tidbits on how they impact university finances.

Most pensions are subject to federal income taxes

Those taxes kick in once someone starts taking distributions from their pension. Whether a pension is subject to state income taxes depends on the state and other factors. Learn more about how pensions are taxed in this article.

A growing number of Americans are leaving trust funds behind for their pets

A pet trust ensures that an animal receives financial support and care if its owner can no longer care for the pet. Some lucky dogs have inherited millions of dollars from their owners.

Learn how to set up a trust

Setting up a trust often costs at least a few thousand dollars, given that the process typically requires paying for a lawyer’s time. An article lays out the step-by-step process one should follow in order to set a trust up.