Many people need to be made aware of the difference between a will and a trust. Both legal documents deal with the distribution of assets after an individual passes away.
But, they operate in different ways and serve different purposes. Understanding the differences between a will and a trust is essential. This can help you distribute your assets well. Read on as we explain the differences between a will and a trust.
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What is a Will?
A will is a legal document that specifies how an individual’s assets will be distributed after their death. The individual or testator writing a will designates an executor. This individual handles managing the estate and distributes the assets to the beneficiaries.
The executor must follow the instructions specified in the will, and the probate court supervises the process.
Benefits of a Will
A will allows an individual to choose an executor to manage their estate and specify how their assets will be distributed. A will also allows one to name a guardian for their children, and someone to manage assets for their children until their adulthood.
It also allows them to donate assets to a charity, and disinherit individuals. But, a will only becomes effective after the testator’s death and only applies to assets owned by the testator.
What is a Trust?
A trust is a legal arrangement where the individual or grantor transfers assets to a trustee. The trustee manages the assets for the benefit of the beneficiaries.
Unlike wills, a trust is effective during the grantor’s lifetime and can continue after death. There are two types of trusts: revocable and irrevocable.
Revocable Trust
In a revocable trust, the grantor can change or revoke it at any time during their lifetime. The grantor can also serve as the trustee. This allows them to maintain control over the assets while they are alive.
The assets in a revocable trust are not subject to probate. This means they can be distributed in a fast and private manner.
Irrevocable Trust
In an irrevocable trust, the grantor transfers assets to the trustee and gives up control over them. The grantor cannot change or revoke the trust once it is established. The assets in an irrevocable trust are also not subject to probate and can provide tax benefits.
Benefits of a Trust?
A trust offers several advantages for an individual. This includes avoiding probate and providing for the management of assets during their lifetime and after death.
It also allows for maintaining privacy and planning for incapacity. And, it allows them to provide for minor children or family members with special needs, and reduce estate taxes.
Which One Should You Choose?
Deciding between a will and a trust is crucial in estate planning. Choosing the wrong option can lead to unintended consequences and more expenses.
So it’s important to understand the differences between the two and know the estate planning mistakes to avoid. These, along with consulting with a legal professional, can help you make an informed decision.
The Difference Between a Will and a Trust
Understanding the difference between a will and a trust is important. This ensures your assets are distributed according to your wishes. A will is effective after the testator’s death and applies to assets the testator owns. A trust is effective during the grantor’s lifetime and can continue after death.
Deciding between trust vs will depends on the individual. Consult with an attorney to choose the option that is best for you.
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