Many people are familiar with the terms “will” and “trust”, but when asked the difference, it can be a struggle to explain. Both are useful estate planning components, and both can work together as part of a comprehensive estate plan. Understanding this piece of estate planning will help assure that your assets can pass to your heirs in the most efficient way possible.
A will is a legal document that directs who will receive your property in the event of your death. It also appoints an executor who has the legal right to carry out your wishes. A will covers any assets and property that is held solely in your name at the time of death. It doesn’t cover joint property. A will goes into effect only after you die and it will pass through probate, where a court oversees the execution and ensures that both the will is valid and is being carried out according to the wishes of the deceased. A will is considered a public record.
A trust is a legal arrangement through which a trustee, either a person or an institution, holds legal title to the property of a beneficiary. A trust often has two types of beneficiaries – one that will receive income during their life, and another that will receive whatever is left when the first beneficiary dies. A trust contains only the property that has been transferred to and put in the name of the trust. Trusts pass outside of probate, which can save time and money, and because it doesn’t become part of public record, it can remain private. A trust goes into effect as soon as you create it.
There are considerations to take into account for both wills and trust. A will is essential when you have minor children. It allows you to name guardians for minor children, to specify funeral arrangements, and otherwise make very specific requests. Without a will, the guardianship of minors will be put in the hands of the court with no legal guidance from the deceased. A trust can be used to plan for disability, and can provide significant savings on taxes. When the beneficiary is the surviving spouse, assets are typically able to pass without going through a will or trust. But when assets are being passed to the next generation, wills and trusts both have a place in the estate plan.
A comprehensive estate plan typically will make use of both wills and trusts. There are plenty of intricate details in setting up an estate plan that helps your surviving heirs move through the process quickly and painlessly. Having an estate planning attorney will guide you toward the best use of both in your estate plan. Contact my office today to get started on yours.