At every stage of life, estate planning plays an important role in providing for your family after death and managing your assets while you are living. Wills and trusts are tools you can use to plan your estate no matter what your net worth is. What is the difference between a will and a trust? Which one is better for your situation, or is there a benefit to having both?
A will is a legal document that directs how assets will be distributed upon death and appoints an executor, or representative, who is tasked with carrying out your wishes.
A trust is a legal agreement that is used to distribute property and assets before death. An individual or institution known as the trustee holds legal title to property and other assets and manages or distributes them on behalf of a beneficiary. There are two types of trust beneficiaries. The first, receives income from the trust during a set period of their lifetime. The second, receives the balance of trust assets upon some milestone of the first beneficiary’s life such as reaching a certain age or upon their death.
A will goes into effect only after a person dies. It is most often used to appoint a guardian for minor children and specify the deceased person’s wishes for their funeral arrangements. In terms of property such as real estate, a will only applies to property that are titled in your name at the time of death. A trust becomes effective as soon as it has been created. It is used during a person’s lifetime to plan for disability and to create a tax shelter for assets. The title to real estate must be transferred to the trust in order for the trustee to manage and distribute that property from the trust.
When you create a will, it is filed with the probate court which oversees the administration of your will. With a will, the matters of your estate become part of the public record. The terms and conditions of a trust can remain private and court supervision is not required to administer the trust.
Contact estate planning attorneys T.R. Spencer Law Office to determine if a will, trust, or both will meet your needs. The staff will answer your questions and make an appointment for you to review your current estate plan, create a new, or modify an existing will or trust.