Less than half of U.S adults admit to having a will defining how they want their estate handled after their death, and even fewer have a trust in place for their assets.
But why do so many Americans skip this critical step? While most confess to not having got around to it yet, others believe they don’t have enough assets to leave to anyone. However, many simply don’t know anything about wills or living trusts or how to set them up.
If this sounds like you, below we explain the difference between a trust and a will so that you can begin your estate planning today.
What’s the Difference Between a Trust and a Will?
Both are legal documents that specify certain criteria regarding owned assets and beneficiaries. Wills only take effect upon death whereas trusts are helpful both in life and death. Let’s look at a will vs trust below.
Wills are legal documents that indicate the handling of your assets after you die. Some decisions also need to be made after your death, such as the appointment of an executor, guardians for any minors or pets, and specifications for your funeral.
In order to be valid, wills need to be witnessed and filed with the probate court in your jurisdiction, and unlike a trust, this document is publically available via court records. If you have any outstanding debts, the state uses your estate to repay them, with any remainder being divided up amongst any beneficiaries.
On the other hand, trusts go even further to protect your assets. There are two types of trusts: a revocable trust, also referred to as a living trust, and an irrevocable trust. Revocable trusts are the most common, allowing for amendments or cancellation at any time while the trustor is alive.
Trusts come into effect once the transfer of assets is complete and a trustee is appointed. Additionally, once you die, your assets are protected from probate with a trust.
It is wise to draft both a will as well as a living trust for the most effective estate planning but be sure to consult with an estate planning lawyer first.
How to Write a Will and Draft a Trust
It’s essential to consult your state’s legal requirements before writing a will; otherwise, a court could deem it invalid.
A will needs to include a list of very specific details, including but not limited to a declaration of sound mind, legal age, and that this is your last will before you die.
Since trusts handle your estate, which is all your property combined. It would include personal items, bank accounts, real estate, stocks, etc.
For a trust to be legally valid, it needs to meet certain conditions, so it’s best to consult experts like estate planning attorneys to ensure everything is correct and legal when setting up a trust.
Plan For the Future You Won’t Be In
Knowing the difference between a trust and a will can go a long way to building a secure estate plan for when you’re no longer around. Having a trust can ensure your assets go to the intended beneficiaries as you wish, and having a will can indicate your last wishes.
Taking care of everything beforehand will spare your loved ones from dealing with your loss without knowing what you wanted.
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