You’ve probably heard the terms “Will” and “Trust,” but do you really understand the difference between each? And even more, do you know which Plan will best protect your family and assets? Probably both.
There are many estate planning options out there and deciding on the right path to take can feel overwhelming. Preparing for your future and making these important decisions now is the best way to make things easier on your loved ones when they’ll need it most.
Will vs Trust
While Wills and Trusts do have a lot of overlap, there are also several differences between the two. Ultimately, both are ways to say who will receive your assets. They just do it in different ways, and each has its own advantages and disadvantages.
One big difference between the two is in how and when they take effect. Wills don’t go into effect until you pass away, whereas a Trust is effective immediately upon signing and funding it.
It may be easier to think of a Will as a “simple” document. Wills allow you to:
Name guardians for kids and pets
Designate where your assets go
Specify your final arrangements
While it is an easier process, the simplicity of a Will does come with some drawbacks. For example, Wills offer somewhat limited control over the distribution of assets. They also likely have to go through the probate process (probate court) after you pass away. This leaves the Will up for court interpretation and for anyone who might have a claim against your estate to address it, and collect on it, before the estate is distributed.
A Trust is a bit more complicated, but can provide some great benefits. Trusts:
Offer greater control over when and how your assets are distributed
Apply to any assets you hold inside the Trust
Come in many different forms and types
Keep in mind that after you create a Trust it must be funded by transferring your assets to it, making the Trust the owner. Funding a trust sounds more complicated than it is. Although tedious, it is merely retitling all of your assets from your individual name to the name of the Trust. Despite having to go through the extra step of funding your Trust, they provide a major benefit over Wills. They’re often used to avoid probate court entirely and have the estate immediately pass to your loved ones with ease. Additionally, Trusts provide for better and streamlined management of your assets. For example, after you pass your Trust might call for your trustee to manage your Trust and make only certain distributions to your children or grandchildren upon reaching a certain age or achieving certain accomplishments. These benefits usually justify the additional complexity of setting up a Trust.
But even if you make a living trust, you should make a will as well. There are two main reasons.
Reason 1: A Living Trust Never Includes Everything You Own
One big reason to write a will is that a living trust covers only property you have transferred, in writing, to the trust. Almost no one transfers everything to a trust. And even if you do scrupulously try to transfer everything, there’s always the chance you’ll acquire property shortly before you die. If you don’t think to (or aren’t able to) transfer ownership of it to your living trust, it won’t pass under the terms of the trust document.
Reason 2: A Will Does Things a Trust Can’t
Second, a will can do some important things that a living trust document cannot. For example, in many states if you have minor children and want to name a guardian for them—someone to raise them if you and the other parent die before they reach adulthood—you must use a will. You can’t use your living trust. You can also use a will to forgive (cancel) debts owed to you, something that isn’t done in a trust document.
What Kind of a Will Do You Need?
The good news is that if you use a living trust as your primary way to leave property, all you need is a bare-bones will. In it, state who should inherit any property that you don’t specifically transfer to your living trust or leave to someone in some other way.
One kind of simple will is called a “pour-over” will, so named because it directs that all your remaining property be poured over into your living trust. That property must still go through probate on the way to your trust, however.
Let’s get your estate plan in order. Protect yourself & your hard-earned legacy. You may ALWAYS go back to amend, revise, or even revoke. Contact me today to sit down and discuss.
Will vs Trust – What is The Difference
You’ve probably heard the terms “Will” and “Trust,” but do you really understand the difference between each? And even more, do you know which Plan will best protect your family and assets? Probably both.
There are many estate planning options out there and deciding on the right path to take can feel overwhelming. Preparing for your future and making these important decisions now is the best way to make things easier on your loved ones when they’ll need it most.
Will vs Trust
While Wills and Trusts do have a lot of overlap, there are also several differences between the two. Ultimately, both are ways to say who will receive your assets. They just do it in different ways, and each has its own advantages and disadvantages.
One big difference between the two is in how and when they take effect. Wills don’t go into effect until you pass away, whereas a Trust is effective immediately upon signing and funding it.
It may be easier to think of a Will as a “simple” document. Wills allow you to:
While it is an easier process, the simplicity of a Will does come with some drawbacks. For example, Wills offer somewhat limited control over the distribution of assets. They also likely have to go through the probate process (probate court) after you pass away. This leaves the Will up for court interpretation and for anyone who might have a claim against your estate to address it, and collect on it, before the estate is distributed.
A Trust is a bit more complicated, but can provide some great benefits. Trusts:
Keep in mind that after you create a Trust it must be funded by transferring your assets to it, making the Trust the owner. Funding a trust sounds more complicated than it is. Although tedious, it is merely retitling all of your assets from your individual name to the name of the Trust. Despite having to go through the extra step of funding your Trust, they provide a major benefit over Wills. They’re often used to avoid probate court entirely and have the estate immediately pass to your loved ones with ease. Additionally, Trusts provide for better and streamlined management of your assets. For example, after you pass your Trust might call for your trustee to manage your Trust and make only certain distributions to your children or grandchildren upon reaching a certain age or achieving certain accomplishments. These benefits usually justify the additional complexity of setting up a Trust.
But even if you make a living trust, you should make a will as well. There are two main reasons.
Reason 1: A Living Trust Never Includes Everything You Own
One big reason to write a will is that a living trust covers only property you have transferred, in writing, to the trust. Almost no one transfers everything to a trust. And even if you do scrupulously try to transfer everything, there’s always the chance you’ll acquire property shortly before you die. If you don’t think to (or aren’t able to) transfer ownership of it to your living trust, it won’t pass under the terms of the trust document.
Reason 2: A Will Does Things a Trust Can’t
Second, a will can do some important things that a living trust document cannot. For example, in many states if you have minor children and want to name a guardian for them—someone to raise them if you and the other parent die before they reach adulthood—you must use a will. You can’t use your living trust. You can also use a will to forgive (cancel) debts owed to you, something that isn’t done in a trust document.
What Kind of a Will Do You Need?
The good news is that if you use a living trust as your primary way to leave property, all you need is a bare-bones will. In it, state who should inherit any property that you don’t specifically transfer to your living trust or leave to someone in some other way.
One kind of simple will is called a “pour-over” will, so named because it directs that all your remaining property be poured over into your living trust. That property must still go through probate on the way to your trust, however.
Let’s get your estate plan in order. Protect yourself & your hard-earned legacy. You may ALWAYS go back to amend, revise, or even revoke. Contact me today to sit down and discuss.
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