Are you concerned about how you’ll distribute your wealth and assets to your heirs?
You’ve probably considered using either a Trust or a Will. But what is the key difference between a Trust and a Will? Which is the best route for you to take?
You want to make sure that you choose the right option for your assets. You want to make sure they get a fair distribution.
You want to make sure that they’re given to heirs who will be responsible for them.
Here’s what you need to know about a Will vs Trust:
Creating a Will
A Will is a legally binding document that outlines how you wish your affairs to be handled upon your death.
This can include a list of your assets and debts. It’ll outline how you want your debts to be paid off. It’ll outline to whom you wish to bequeath your assets.
A Will becomes a matter of public record. Any asset not mentioned in your will shall go through a probate court (in most states). This means that your heirs might have to fight for your assets in such a court.
If you die without leaving a will then your heirs will have to likely fight in court over your assets. Estate planning is crucial for all families and especially for young families, who often postpone this responsibility.
You can find more info on the importance of estate planning for younger families.
What Is a Trust?
A Trust is when you hand over the responsibility of your assets to a third party. There are two types of Trusts: living and testamentary.
With a Living Trust, you assign your estate to a third party who’ll be trusted to manage your estate after your death. You can make changes to this trust at any time during your lifetime.
Upon your death, your estate will be managed by the third party who’ll distribute it among your heirs. It doesn’t require going through a probate court at all.
With a Testamentary Trust, you have to name a trustee who’ll manage your assets.
This Trust will also discuss how you want your assets to get distributed. The major benefit of a Trust is that it remains private. It won’t be a matter of public record.
The privacy and avoidance of going to a probate court are the major benefits of choosing a Trust. It’s why many benefactors prefer it to a Will.
The Main Difference Between a Trust and a Will
So should you choose a Trust or a Will for distributing your assets? You want to make sure you understand the differences between them to see which is ideal for your situation.
If you have minor children, you might want to consider a Will. With a Will, you can assign the guardianship of any minor children upon your death. This is ideal if you don’t have a living spouse who’ll assume guardianship upon your death.
A Will can be challenged in court whereas it’s rare for a Trust to get challenged in court. A Will can also be taken to a probate court whereas this doesn’t happen with a Trust.
With a Trust, there are rules around inheritance whereas these don’t exist for Wills. A Trust becomes active once you sign it. A Will only becomes active upon your death.
You should always consult an attorney and a financial advisor before settling on your decision.
You’ll have to decide which is the best option based on what you’ll find most comfortable. You also have to think about your heirs and what hassle they’ll go through with a Will or Trust.
Can You Have Both?
You can have both a Will and Trust and they’ll both stand as separate legal documents.
There can be cases in which a Trust will override what’s written in a Will. As such, make sure you have attorneys scrutinize both documents. If you’ve written one, have it viewed by an attorney before you draft the second document.
Whom Do I Leave My Assets To?
If you have several heirs, you might wonder to whom you should leave your assets.
You should always discuss this with your legal and financial advisors beforehand. They’ll provide you with the appropriate guidance on making this important decision.
But you want to consider several factors when distributing your assets. If you run a business, you want to think who’ll be best to bequeath it to.
For example, do your children have qualifications for running your business? Have you trained them in how the business works? Is there one child who can do a better job than your other children?
In some cases, you’ll want to make all your children into equal partners for your business. In other cases, you’ll leave it solely to one child. There’s also the possibility that the responsibilities of the business will be granted to a qualified third party!
The same goes for your wealth. It’s imperative that you teach your heirs how to manage their money. If they haven’t shown you that they know how to manage wealth, it’s likely that they’ll blow their inheritance!
You also want to think about what assets you’ll want to keep in a business or give to charity.
For example, if you own any intellectual property you might want to make them the property of a business. If you have any excess wealth, you might want it donated to charity.
Take your time to think about your assets, who’ll benefit from them, and who’ll be responsible for them.
Choose Your Documents Today
Now that you know the difference between a Trust and a Will, you can decide which is the best route for you.
With both these options, you can set up a structure to distribute your assets to your heirs. You can prevent major issues that might arise after your death.
Take the time to keep track of your assets and debts. Find a great service that’ll help you set up a Will or Trust before your death.
You can find more great legal tips on our website!
