The Differences of a Will and Trust in Estate Planning
While both wills and trusts sound similar concerning estate planning, both have their unique uses according to the benefactor’s and beneficiary’s conditions. Let’s examine each one more closely and determine which of the two will suit you in the future.
What Is a Trust?
Trusts are legal arrangements that provide the transfer of assets from their owner, called the grantor or trustor, to a trustee. It sets the terms for the trustee’s management of the assets for distributions to one or more designated beneficiaries and the final asset disposition.
In that regard, the trustee is a fiduciary obligated to handle the trust assets according to the trust document’s terms and solely in the beneficiaries’ best interests.
Unlike wills that take immediate effect upon death, trusts become effective upon transferring assets to the beneficiaries. There are two kinds:
- A “living trust” is created during a grantor’s lifetime.
- A “testamentary trust” is created after death by directives in the decedent-grantor’s will. Both options are necessary when the beneficiaries are still not of legal age to handle the bequeathed assets.
These legal arrangements are frequently used in estate planning to benefit and provide for the distribution of assets to the grantor’s heirs. Additionally, trusts can serve various purposes, both before and after the grantor’s death.
What Is a Will?
On the other hand, wills are documents that direct the distribution of assets after death to the designated heirs and beneficiaries. For example, it can give cash and property to your children and family.
This document will also include your instructions for matters that require decisions after your death, such as the appointment of an executor to carry out the terms of the will and guardians for minor children.
Wills may direct an executor to create a trust and appoint a trustee to hold assets for the benefit of particular persons. This is applicable for minors until they reach a specified majority or legal age to handle the bequeathed assets.
Wills must be signed and witnessed as required by state law to be considered valid. In addition, it must be filed with the probate court in your jurisdiction and carried out by your designated executor.
The document is publicly available in the probate court records, which oversees its execution and has jurisdiction over any disputes regarding estate planning concerns.
Your Estate Planning: A Trust or a Will?
It may benefit from both arrangements if your estate is more complex or includes difficult-to-manage assets, such as rental properties or business interests. A simple will may be most appropriate if you don’t have complicated financial holdings and you want to avoid probate for its cost and delays.
If you have complex financial holdings, it generally is best to have a trust and a will to help preserve confidentiality; However, having both can be expensive and potentially time-consuming, and they may offer valuable benefits.
A trust can provide privacy, support family peace during disagreements over how to manage the estate, protect against creditors’ claims on specific items (such as cars or furniture), prevent potential conflicts between heirs, direct how the estate’s assets should be used even after death (such as paying educational expenses for grandchildren), or exclude heirs with insufficient mental capacity.
Using a will, your estate avoids intestacy; with a choice, the estate avoids intestacy and potentially costly public legal proceedings to identify and appoint an executor and allocate the estate’s remaining assets.
You need to carefully consider the nature and value of your assets, the age and capabilities of your heirs, tax planning considerations, and the complexity of your bequests to protect their value and preserve the benefits of your recipients. That’s why you should never do estate planning by yourself. You need an experienced lawyer by your side.
Thus, contact Attorney Marc Carlson from Estate Planning Lawyers Colorado for estate planning in Colorado! I make life easier for those involved by reducing financial burdens and emotional stress through services such as wills, trusts, probates, and legacy planning! Schedule a virtual meeting with us today!