Understanding the Difference between a Will and a Trust
Making arrangements for estate planning and what happens to your assets after you're gone is really important. This plan can include things like a will or a trust. Understanding the difference between a will and a trust is critical. Both a will and a trust can help ensure that your property gets distributed following your end-of-life and testamentary wishes. Both can also make sure your distributing property where you want to after you die. But a will and a trust are not the same thing.
In this complete guide, we'll talk about the difference between a will and a trust, but also how they can work together to keep your property safe. We will also discuss how to pick the best testamentary strategy for you and your inheritance. We will also touch on charitable testamentary transfers, how to avoid probate, how to make contributions to a trust, and other circumstances. Knowing the difference between a will and a trust can help you make better choices about how to keep your property safe, regardless of your circumstances. Your beneficiaries will thank you for it.
Here at Lopes Law, we know that doing this kind of estate planning is a big job, filled with complexity. We want to help our clients, like you, learn more about estate planning. That is why we have prepared this complete guide, which will enlighten you on the difference between a will and a trust. Our estate planning lawyers are really good at helping people with estate planning. This guide about the difference between a will and a trust will help you understand what each testamentary document does.
What Is a Will and How Does It Work?
A will is a testamentary legal document that sets specific arrangements about how and to whom you want your assets distributed after death. The will serves as the most basic and straightforward form of estate planning. The document can also be used to address guardianship for minor children, and sometimes even stipulate how any pet care should be handled (although a pet trust can also help; you can read about that here). The lack of complexity does come with some downsides, like the fact that a will becomes public record.
When you create a will, it does not automatically go into effect when you die. The will must be probated at your county's Register of Wills. If you become incapacitated a will has no effect, it can only be probated after your death. A will needs to be recognized by state and federal courts in order to be valid. Your executor is responsible for carrying out the terms of your will, which can include selling or transferring certain assets to beneficiaries. Depending on your net worth and number of beneficiaries, there may also be taxes due upon death.
Ultimately, a will provides the most basic form of protection for you and your family upon death. When planning for the future, it is important to understand the differences between a will and a trust. A will is a legal document that outlines how you wish to distribute your assets after you pass away. It's important to consider other options as part of an overall estate plan because of the limited protection a will offers—and the fact that it does not go into effect until after death.
What Is a Trust and How Does It Work?
On the other hand, a trust is a legal entity created (by a trust agreement) to manage assets for designated beneficiaries. Both a will and a trust can be used as testamentary documents to pass on your assets, but they have different purposes and advantages. A will is primarily used to assign guardianship of minor children and name an executor to carry out your wishes after you pass away. The executor or guardian do not need to have a special relationship to serve. The designation of an executor or for guardianship is the sole choice of the person creating the will (the testator).
A trust, on the other hand, is used to manage your assets over a period of time (sometimes even while you are alive). The trust grants more control over the assets and helps ensure that your assets are distributed according to your wishes. A trust agreement also allows you control over ensuring that your beneficiaries are taken care of. Understanding the difference between a will and a trust can help you make the best decision for your family and inheritance.
Typically a trust requires contributions during your lifetime and has a higher degree of complexity (with regard to your arrangements). So, what does this boil down to for you? You have probably heard that a will often requires court approval and supervision, but did you know that a trust does not? Assets in a trust will pass outside of the probate process. Furthermore, with a trust you can choose how long its provisions remain in effect. Additionally, a trust is established during your lifetime, it takes effect immediately after your death. A will doesn’t become effective until after you pass away.