Trusts vs. Wills: What’s the Right Estate Planning Strategy for You?
Only a few people know the differences between a trust and a will, making the choice difficult when leaving the property or other assets to beneficiaries. The right choice for you depends entirely on how you want to plan the passing of your estate.
An Overview Of Wills
In obtaining family legal advice for your property, you’re probably more familiar with wills than trusts. A will is a document that controls the distribution of your assets to heirs and beneficiaries after your death. On your death, the instructions in your will come into play. They can hold the appointment of an executor of the will, a guardian of any minor children, or any directions for your funeral and burial.
A will must be signed and witnessed, must be filed with the probate court, and be carried out by a designated executor. If you die without a will, the probate court controls your assets and estate and determines what happens to them.
An Overview Of Trusts
Trusts are legal arrangements that control the transfer of assets from the owner to a trustee to benefit the beneficiaries. The trust sets out the terms of the management of the assets, especially if they are going to be distributed between several heirs.
Trusts do not require death to come into effect; they come into play upon transferring assets into the trust itself. However, there can be a “testamentary trust” that is created after death where the directives have been laid out in a will.
There are different kinds of trusts to consider that can cover most situations involving assets.
- Revocable Trust: trusts created that can be altered, amended, or terminated anytime. The owner is usually the grantor and retains the assets until death, and then they are passed outside of probate.
- Irrevocable Trust: grantors give up their rights to the assets and are controlled by a trustee instead of the grantor themselves.
- Special Purpose Trust: specific arrangements made to fulfill a specific purpose.
- Charitable Trust: irrevocable trusts that benefit charities.
- Special Needs Trust: trusts made for individuals with disabilities.
Which Is Better: Trust Or Will?
Although there doesn’t need to be an either/or question (you can have both a will and a trust simultaneously), the answer depends on the financial circumstances.
Wills are generally less expensive to write and are easier to implement; the only issue is that they can be contested in probate court. Any trust other than a revocable trust cannot be changed once it is in effect; trusts are generally more expensive to draw up and require a trustee to be named.
Having an estate plan established is important, especially later on in life. Speak with an attorney to determine the best option for you (or both) so that your assets and property aren’t left to the decision of the state to make on your behalf.