Americans are confused. They’re confused about estate planning and rightfully so, it’s a diverse topic.
Should you create a will, a trust or both? It depends because they serve different purposes, but both can be beneficial to form a complete estate plan.
Will and trust basics
A will goes into effect after you pass away. A trust goes into effect as soon as its finalized. A will is a directive document. It states, through a legal representative, who will receive what property and assets after your death. A trust can be set up to distribute property and assets before, at or after death. The creator of the trust will appoint a “trustee”, who can be an individual, bank or law firm, that has the legal right to the property and divvies out that income to the beneficiaries named in the trust. A trust can dictate whether the beneficiaries receive their inherited property and assets in installments or all at once.
A will covers only legal property that is in your name. It does not cover jointly-owned property or property labeled in a trust.
A trust only protects property that was transferred to the trust. Your property must be put in the name of the trust for it to be included.
Do you want to keep your estate plan private? Get a trust. Wills must go through a probate process, which means a court will oversee the handling of the will to establish its validity and ensure the property is allocated as the deceased intended. Conversely, a trust does not have to pass through probate, which can save you time and money and increase privacy.
Containing different advantages and disadvantages, wills and trusts differ. A will would allow you to dictate your funeral arrangements or assign a guardian for your children, while trusts are advantageous to create a plan for disability or tax savings.
According to a study by WealthCounsel, 46% of Americans are interested in learning more about estate planning, but only 27% have talked with their families about it. Break the mold and consult with your family and an estate planning attorney to ensure your property falls into the right hands.