You know you aren’t going to live forever, so it’s important to make preparations for the inevitable. The terms will and trust get thrown around a lot when it comes to planning for the future, but is there a difference between a will and a trust? Do you need one or the other? Do you need to have both?
Continue reading to learn everything that you may need to know about estate planning, including wills and trusts.
What Is a Will?
A will is a legal document that enforces the wishes of an individual after their death in writing. Having a will is an important component of estate planning. They’re used to name the guardian(s) of any minor children of the deceased person. It also transfers the rights to objects and assets to the friends, relatives, and charities handpicked by the individual before their passing.
The contents of a will may involve:
- A list of assets and debts (including valuable family heirlooms)
- Contents of a safe deposit box
The most common type of will is a testamentary will. Other types of wills might include holographic wills, oral wills, and pour-over wills.
Advantages of a Will
Having a will allows the smooth transfer of estate and other legal proceedings because it has such a clear message from the deceased individual. Wills are not very expensive to draw up and then maintain as long as they are legally declared.
A will helps surviving family members to figure out what their loved one wanted to happen he/she was gone. A will gives more of a personal touch to the living friends and relatives. It can depict funeral wishes and who inherits the fine china after their passing.
Having a will allows the grantor to disinherit a child or other family member. In certain situations, a grantor may disinherit their spouse from getting anything by naming it in their will. It is, though, difficult to completely cut a spouse out of your will unless there was a prenuptial or postnuptial agreement.
Disadvantages of a Will
A will must go through probate before the assets get released to the beneficiaries. Probate is the process in which the will is thoroughly examined to make sure that it is, in fact, authentic.
Probate can get drawn out for long periods of time before the assets may be released. This is especially common when the will is contested. Hiring a probate attorney can be expensive, and the probate process pretty much unavoidable in most states.
When you don’t have a will in place (intestate), the state oversees the distribution of all assets, regardless of what the deceased person may have wanted for their family.
What Is a Trust?
A trust is made up of three parts: the grantor who will create the trust, the trustee who will oversee the trust, and the beneficiary who will receive the trust. While a will becomes active after the passing of an individual, a trust becomes active when it is created. This means that a trust helps the grantor decide who controls his or her assets during and after life.
The grantor creates a trust so that their assets get protection without having to deal with the day-to-day of managing the trust. A certification of trust will name the basic terms of a trust.
Beneficiaries cannot contest a trust. Trusts also do not require the probate process. This allows property and other assets to get passed on to the beneficiaries immediately after the trust is written.
Types of Trusts
There are two different types of trusts: a a Living (Revocable) Trust and an Irrevocable Trust.
An irrevocable trust is a type of trust that is usually created for tax purposes. It’s thought that an irrevocable trust cannot be changed once it is in writing. This isn’t entirely accurate. A grantors access to the trust may be restricted or limited in some ways. These standards are set forth by the grantor.
A grantor may alter a revocable trust as they wish. A living trust is an example of a revocable trust. The assets listed in a trust are still owned by the Grantor and can be taken back out if necessary.
Advantages of a Trust
The estate stays private in a trust whereas a will becomes a public record. This may be ideal for those wanting to stay out of the public eye. Because a trust avoids the entire probate process, there are no hefty fees from hiring a probate attorney and the assets are given directly to the beneficiaries.
Know the Difference Between a Will and a Trust
Now that you know the difference between a Will and a Trust, you will be able to better prepare for the future. Most people should have, at the very least, a Last Will and Testament, especially those with children under the age of 18 who must be appointed a legal guardian if probate were to occur.
Contact Rhodes Law Firm, PC today with any questions you may have regarding estate planning for the future. We’re standing by with the answers that you are searching for.