I can’t afford to die, I would lose too much money, once said the comedian George Burns!
Dying is inevitable for all of us but, are you leaving your loved ones well prepared for life? Even if you are not part of the elite, you will have some form of assets. Thus, you should plan ahead and have an estate plan to ensure that your wishes for the distribution of your estate are kept.
A will and a trust have one important difference. In a will, your estate goes through the probate process and is public knowledge. Whereas, a trust’s property avoids the probate process and remains private. Another difference is, that a will can be challenged by beneficiaries whereas, a trust is rarely so.
Wills and trusts are both aspects of estate planning, but what’s the difference? This guideline explains the difference between a will and a trust.
What Is a Will?
A Will is a legal written document that communicates your instructions and wishes after death. In your will, you will set out your wishes on how you want your estate (your property, money, possessions, and other assets) divided, as well as the ongoing handling of distribution to family and friends after your death.
In it, you will appoint an executor as your legal representative. He will make sure that he follows your wishes to a T. In this document you will also name your beneficiaries.
If you still have minor children, you will need to name guardians to take care of them and leave any further specific instructions about the handling of the when, how, and who of your wishes.
Submission of your last will and testament to the probate court where you last lived, will happen. That may sound daunting, but it isn’t. What the probate court judge does is to make sure that the will is legal and valid.
Once this has been done, your executor will take charge. The executor can then go ahead with the resolution of any outstanding issues. These could be anything from financial liabilities and distribution of your assets as set out in the will.
What Is a Trust?
A trust is a legal third party entity, whose purpose is to protect the assets in your estate. It is purely a financial element. When you hear the word trust, you normally think of the rich and famous. But, they are becoming more popular with the normal Joe Blogg in the street.
If you have a trust, you still need to draw up a will to appoint an executor to handle the distribution of your assets that are not in the trust’s name. When you draw up a trust, you can transfer your assets so that the trust, in effect, becomes the legal owner of said assets.
There are many different trusts you can choose but the most popular choice is an irrevocable trust. This is the most pertinent to personal estate planning.
Once a trust is created, and you have put the assets in the name of the trust, it is irreversible. This way, when you are worried or have doubts about beneficiaries who cannot handle finances, benefits can be paid to them from time to time. As a result, this will prevent them from wasting away their inherited money!
The main reason for many people creating a trust is avoiding probate tax on your estate.
What is the Difference Between a Will and a Trust?
In certain respects, a trust and a will have the same goal. A trust, however, lets you accomplish other objectives that a will, will not.
Regardless, every person should have a will. A trust is by choice. The question is which way to transfer the majority of your accumulated wealth to your beneficiaries.
What is the main difference between a will and a trust? A will comes into effect immediately after death. Whereas, a trust goes into effect on registration thereof.
A will is a document that states who will receive your property at your death. It appoints an executor to make sure your wishes are carried out.
A trust is a legal and binding entity, called a trustee, who ‘looks after’ your estate on your behalf. A trustee can start distributing property, before death, alternatively at death, or even after death according to your wishes.
There are two types of beneficiaries for a trust. One, beneficiaries that receive income during their lifetime, and two, other beneficiaries receive the rest of the estate after the first one passes away.
Cost is also to be taken into consideration. A will is cheaper to draw up than the preparation of a trust which can amount to quite a substantial expense.
Either way, schedule a visit to Andrew J. Chamberlain Law Office for a more in-depth discussion on whether you should choose a will or a trust or both!
So Which Is Best For You?
So which is best for you? You know the saying what is good for the goose may not be good for the gander. The same goes for wills and trusts.
One way to get experienced advice and get to know the difference between a will and a trust is to schedule a visit to Andrew J. Chamberlain Law Office. They will help you plan and determine which is the best way for your estate. They will also make sure that you meet your personal final goals while, taking into account costs, privacy, and efficiency.
Of course, the most important part of your estate planning is that you should be prepared in a way that best suits the needs of your family and of course, you.