Estate planning isn’t something anyone really wants to do, but it is something everyone should do. For your own benefit, it’s a way of ensuring all your assets and belongings are distributed to the people and organizations you want them to reach. From the potential recipient’s end, it saves stress, disappointment, potential legal fees, and time.
Hopefully you’ve already named beneficiaries on each of your investment accounts, but what about other assets, like your home(s), car(s), and other personal property? A trust or a will can do just that. However, while both are legal documentation that ensures your assets distribute in accordance with your wishes, they work a bit differently. Here’s a quick overview of where they are similar and how they differ.
How a will works
By definition, a will is a “legal declaration of a person’s wishes regarding the disposal of his or her property or estate after death.” The operative term here that distinguishes it from a trust is “after death.”
It can include any type of asset, prescribe exactly who should receive what, and even dictate what should happen in the way of your funeral and burial in the event of your death. In addition to these instructions, your will can include guardianship if you have minors or dependents, as well as things like appointing an executor of your estate.
How a trust works
There are several types of trusts, and for that reason (though not that reason alone), trusts are a bit more complicated. A “living trust” is a trust created during the owner’s lifetime, while a “testamentary trust” can be created post-mortem based on the directives given in the owner’s will. There are also revocable, irrevocable, special purpose, charitable, and special needs trusts, and each has its own rules and purposes.
The main difference between a trust and a will is that, unlike a will, a trust can include legal language to “trigger” different disbursements at intervals prescribed by the grantor (or owner). The trust will name “trustees,” a term for the recipient of a given asset.
Trusts often carry an advantage in that they allow the grantor to ensure eventual trustees are able to avoid probate—an often-messy, time-consuming process—and that their assets are distributed in exact accordance with their wishes without dispute and on a schedule they have predetermined. While it often costs more in initial creation and modification fees, in addition to avoiding “drama,” trusts also have a reputation for saving family members and trustees the costs often associated with executing a will and navigating legal processes.
How do you create a will or trust?
As both wills and trusts are legal documents, you’ll need legal assistance to create and file them. There are numerous software options available for a DIY solution, but speaking with a licensed professional is the best way to get firm, accurate answers and guidance.
Both wills and trusts are documents you can amend and change over time (with the exception at times of an irrevocable trust).
To learn more about the intricacies of wills and trusts, speak with a licensed professional.
