When it comes to estate planning, you need to know the difference between a will and a trust. Luckily, this comparative guide has you covered.
Planning for your family’s well-being once you’re no longer here is essential. But according to studies, 67% of Americans don’t have an estate plan. Thankfully, it’s never too late to get one, no matter how old you are.
If you don’t know much about estate planning or writing a will, this article is for you. We’ll explain the difference between a will and a trust and provide insight into which option might be best. With that said, continue reading below to get more helpful information.
What’s the Difference Between a Will and a Trust?
A will and a trust are both estate-planning tools, but they have very different purposes. A will is a legal document that details how your property and assets should be distributed after you die. It names an executor who makes sure the instructions in the will are followed. A will can also include instructions for guardianship of any minor children.
A trust is an agreement between you and a trustee that can provide for asset management during your lifetime or after death. Your trustee would be responsible for administering the trust according to your instructions. The instructions could include setting aside funds for specific purposes or people.
With a trust, there is no need for a probate court proceeding. As a result, it can provide more privacy than a will. Also, it may be faster to distribute the assets in the trust. It is important to discuss with an attorney which estate planning tool would work best for your specific situation.
A combination of both a will and trust may achieve the desired results. Having both documents in place is a way to ensure that your wishes are carried out in the event of death. It is important to work with an experienced legal professional when creating either a will or trust, as these documents must comply with state laws.
By understanding the difference between a will and trust, you can make informed decisions about how best to protect your assets for your beneficiaries.
How to Decide Between a Will or Trust
When deciding between a will and trust, it is important to consider your personal goals. Do you want certain assets to pass directly to certain individuals? Are there any special needs that need to be addressed?
A will might be the most appropriate document if you have minor children and would like to name a guardian for them. It can also be used to set up a trust for any minor children.
Alternatively, a trust may be the best option if you want to manage assets during your lifetime and after death. It’s also good if you want to provide for special needs of loved ones. A trust can also minimize taxes, making it an attractive choice for those with substantial assets.
No matter which estate planning tool you choose, it is important to work with a knowledgeable attorney who can help ensure that your intentions are carried out properly.
What Are the Different Types of Trusts?
There are several types of trusts used for various purposes. Here’s a closer look at each option:
Revocable Trust
A revocable trust allows you to manage your assets and make changes to the trust during your lifetime. It is commonly used as a way to avoid probate court proceedings after death. While a grantor is still alive, grantors can change or cancel the trust.
Irrevocable Trust
An irrevocable trust cannot be changed or canceled by the grantor once it is created. It is most often used to transfer assets out of a person’s estate in order to reduce taxes, protect assets from creditors, and provide for special needs of loved ones.
Special Needs Trust
A special needs trust is specifically designed to provide for the ongoing care of a disabled individual. It allows the beneficiary to maintain eligibility for government benefits while still providing them with financial assistance.
Charitable Trust
A charitable trust supports a particular charity or cause. The grantor can specify how the money in the trust should be used, and they may receive tax benefits for contributing to the trust.
What Are the Various Types of Wills?
When considering a will, it’s important to understand the different types available. Here’s an overview:
Simple Will
A simple will tranfers assets at death and name guardians for minor children. It is generally considered the least expensive option when creating an estate plan.
Testamentary Trust Will
A testamentary trust will allows the grantor to set up a trust for minor children or other beneficiaries. This type of will also allows the grantor to specify who should receive the assets and when.
Living Will
A living will outlines medical care procedures if a person becomes incapacitated. It allows individuals to designate a person to make medical decisions on their behalf.
Pour-Over Will
A pour-over will is often used in conjunction with a trust. It directs any remaining assets at death to be added to the trust, ensuring that all of the grantor’s assets distribute according to his or her wishes.
Joint Will
A joint will is a legal document created for two people, such as a married couple. It allows the surviving spouse to make decisions about the deceased person’s assets upon their death.
Will vs. Trust: Understanding the Two
Now that you know the difference between a will and a trust, you can move forward with getting your affairs in order. If you need assistance with your estate planning, Johnson/Turner Legal can help you. We have the expertise and knowledge to help you with your preparations.
If you’d like to speak with us, call 651-661-2626 or contact us online. We look forward to assisting you!
