Understanding the difference between a will and a trust is very important, however, most people don’t even think about setting them up until later in life. And then when they finally do want to set something up, they bypass the important discussion of the difference between a will and a trust. Learning the difference and mechanisms of each, as well as setting them up earlier in life, can play a major role in your life and the lives of your family members. It is highly recommended to get yourself a wills lawyer or a trusts lawyer to help further explain to you the difference.
What is a Trust?
A trust is an agreement that allows a third party, the trustee, to hold assets on behalf of a beneficiary. They can be arranged in many different ways and can vary by the specificity of how and when the assets will be passed to the beneficiary. A few key benefits of trusts include the ability to control your wealth, protect your legacy, and maintain your privacy. Ultimately, having a trusts lawyer will dictate how your assets are distributed after your death, appoint any guardians for your minor children, and let you make very specific decisions about how you want your estate handled.
It used to be that a trust was specifically designed to avoid estate taxes, but with incredibly high federal exemption thresholds and many states not having an estate tax at all, tax avoidance is now one of the minor reasons to have a trust. One of the major reasons is to avoid probate court. Thus, spending some money now to keep your estate out of court, paying thousands of dollars to attorneys, is the greatest motivator to do a trust. Still, there are many different kinds of trusts available, which necessitates at least consulting with an attorney to make sure you understand what is available.
What is a Will?
A will can also coordinate the distribution of your assets and appoint guardians for minors after someone dies, but if you are wanting to transfer ownership of your property named in a will to a living beneficiary, you have to go to probate court. This not only costs the estate money, but it can also be time-consuming. This would matter most when the testator’s home needs to be sold to pay bills of the estate. The home cannot be sold and transferred until you have permission from the court.
What is the Difference Between a Will and a Trust?
Wills and trusts are both very useful in estate planning, but they play different roles in this process. One of the greatest differences between them is in regards to their timing. Wills can only go into effect after death, however, trusts take effect directly after being created. When a will is drafted for someone, it is generally filed away until that person dies. On the other hand, once a trust is written, assets can start to be distributed right away based on the terms of the document.
Another significant difference between a will and a trust is in regards to the ownership of certain assets. A will covers all property that is only in your name, it doesn’t cover property that is owned by more than one person. However, a trust can hold your percentage of ownership in homes and businesses. That being said, there are some restrictions on putting certain shared ownership into a trust, so you would need to consult with an attorney before you start moving everything over.
Trusts and Wills Lawyer
An experienced trusts lawyer and wills lawyer can help provide guidance in dealing with these documents. They can help you set them up in a way that best meets your needs while helping to prevent serious problems down the line for loved ones. Don’t attempt this process on your own, hire a lawyer to guide you through the entire process!