Knowing the difference between a will and a trust is important for your assets, even if most people don’t think about the entire process until later in life. Then when people finally 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.
However, we strongly suggest getting yourself a trusts lawyer in Reno to help explain 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. In the end, a trust lawyer will dictate how your assets are distributed after your death, appoint designated guardians for your children, and allow you to make specific decisions about your estate.
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 (the creator of the will) 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.
To learn more about how the probate process works, read our recent blog here.
Wills are simple and inexpensive to create, with no need to retitle assets, but must become part of the public record.
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. Many people feel that a will is acceptable if they don’t own any real estate or aren’t worried that any inheritances won’t be mismanaged by their children. 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. 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.
The costs of trusts and wills differ significantly in Nevada. Wills are billed by the hour in some places, or with a flat fee using a statute consisting of 2-4% of the estate value. Trusts on average have a formation cost from $3,000- $4,000 with yearly trustee fees that vary.
To summarize, here are the differences and benefits of trusts vs. wills:
Trusts and Wills Reno, NV
An experienced trusts lawyer and wills attorney 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!