|Wills vs. Trusts: Defined|
Everyone has heard of wills and trusts. Most articles written on these topics, however, often presume that everyone knows the basics of these important documents. But, in reality, many of us don’t – and with good reason – as they’re rooted in complicated, centuries-old law. Let’s face it, if you’re not an estate planning attorney, these concepts tend to remain merely that – concepts. So, if you’re “fuzzy” about wills and trusts, know that you are not alone. After we show you the difference between these two documents, we’ll tell you why a trust is the better choice.
Wills vs. Trusts: Defined
Let’s take a minute and define both “will” and “trust”:
● provides for the distribution of assets owned by you, but not assets directed to others through beneficiary designations (e.g. life insurance or retirement benefits)
● sends assets in your individual name or payable to your estate through the probate process
● allows you to appoint permanent guardians for your minor children
● names the person you wish to settle your estate (e.g. executor or personal representative)
● doesn’t always include protective trusts for beneficiaries and tax planning because many wills are simple 2-3 page documents
● permits you to revoke or amend your instructions during your lifetime
● tends to cost less than a trust on the outset but costs more to settle during court proceedings after death Trust. A trust is a legal document, signed and witnessed, and effective during your lifetime, during any period of disability, and after death. Because the trust is effective during your lifetime and you can change it, it’s referred to as a “living” document.
● has lifetime benefits
● provides for the distribution of your assets
● avoids probate if fully funded
● provides for a successor trustee upon your death or incapacity
● can address appointing disability guardians for minor children
● often includes protective trusts for beneficiaries and tax planning
● permits you to revoke or amend your wishes during your lifetime
● costs more than a simple will on the outset but much less upon administration, while typically providing significantly more value
The Probate Process: A Key Element in Deciding Between a Will and Trust
The Bottom Line on Wills vs. Trusts
This newsletter is for informational purposes only and is not intended to be construed as written advice about a Federal tax matter. Readers should consult with their own professional advisors to evaluate or pursue tax, accounting, financial, or legal planning strategies.